The Cyprus House of Representatives has approved, by majority vote, a bill forcing the restructuring of loans which have bank convertible bonds as collateral. The bill was approved with 35 votes in favor, 21 against and 1 abstention.
The convertible bonds, which amount to €1.2 billion, were converted to almost worthless shares as part of the resolution of the Bank of Cyprus and Laiki Bank back in 2013. The bill tabled by House President Yiannakis Omirou regulates the restructuring of loans, established by non institutional investors to buy these bonds, which were pledged as collateral.
An amendment proposed by MP of Cyprus` Green Party which was approved with 28 votes in favor, 20 against and 7 abstentions, provides that the compensation will cover loans up to EUR 100,000 which is the guaranteed deposits.
The House President said that after a “flood of laws” provided in the Memorandum with Troika that the Parliament has passed, the state should start to protect those who paid the price. He also said that this law sends the message that things have started to change.
A few days earlier, Cyprus Minister of Finance Haris Georgiades has warned the Parliament about the consequences both on the economy and the Bank of Cyprus, if the bill were to be approved, saying also that the proposed bill seemed to be violating article 28 of the Constitution regarding the right to property and the right to enter into a contract.
The Parliament approved with 33 votes in favor and 23 against the bill proposed by Democratic Party (DIKO) President Nicolas Papadopoulos to give the opportunity to depositors who have suffered a haircut of their deposits to participate in the boards of the banks they rescued, representing 20% of the board members.
The provision will apply for five years from the date of the implementation of the rescue measure by own means, irrespective of whether the affected institution has exited the resolution regime.
Commenting on the approval of the bills, Government Spokesman Nikos Christodoulides said that the government will study and evaluate the laws in consultation with the Attorney General.
As he said in a written statement, “the Government, in order to preserve the country`s credibility and positive perspective, secured with hard work, collective effort and sacrifices, will evaluate the data in consultation with the Attorney General and will decide about any further action “.