Restructuring of Credit Facilities
The Central Bank of Cyprus issued, on 3 April 2015, the revised Directive on Arrears Management of 2015. This Directive, as well as its Appendices, which can be downloaded at the web site of Central Bank of Cyprus, regulate the arrears management framework and establish a Code of Conduct between Authorised Credit Institutions (ACIs) and borrowers.
The main purpose of the Directive is to achieve fair and sustainable restructuring of credit facilities of borrowers (individuals and businesses) experiencing financial difficulties and who cannot meet their contractual obligations. Under this Directive, banks are required to examine and evaluate each case individually and propose solutions, preferably long-term ones, which correspond to the specific needs and economic circumstances of each borrower.
Code of Conduct on the Handling of Borrowers in Financial Difficulties (“Code”)
The Code is part of the Directive on Arrears Management (Appendix 2 of Directive).
ACIs shall apply the provisions of the “Code” to the following persons:
- Natural persons granted credit facilities by the ACI with total balances of credit facilities (including credit facilities of their connected persons) up to one million euro (€1.000.000). The said scope of application includes guarantors of the borrower and third parties who provided securities to the ACI for the borrower.
- Micro and small enterprises granted credit facilities by the ACI with total balances of credit facilities (including credit facilities of their connected persons) up to one million euro (€1.000.000). Micro and small enterprises are defined as follows (European Commission Recommendation of 6 May 2013 concerning the definition of micro, small and medium-sized enterprises (2003/361/EC)):
Number of employees
Annual turnover or balance sheet total
< or = € 2 million
< or = € 10 million
Registered with VAT and Social Security
The following persons do not fall within the scope of application of the Code:
- Persons for which an application for bankruptcy was filed by another creditor
- Persons for which a receiver or administrator was appointed by another creditor
- Persons for which a dissolution decree was issued
Borrowers in financial difficulties who seek restructuring of their loans and who are within the scope of application of the Code must be aware that, in accordance with the Code, ACIs are required to:
- Communicate with the borrower before and during the presence of arrears.
- Request financial information from the borrower. Borrowers who are natural persons are required to submit the “Personal Financial Statement” (PFS), duly completed and signed and a signed declaration to the ACI on the completeness and accuracy of the data in the PFS. The PFS is available in all branches of the ACI and on the website of Bank of Cyprus. With the valid completion and prompt submission of the PFS, the assessment for restructuring purposes will be completed the soonest possible.
- Assess the financial information.
- Propose restructuring solutions.
- Communicate the restructuring proposal.
- Inform the borrower about the mediation procedure governed by the provisions of Part VIA of the Laws on the establishment and operation of the Financial Ombudsman of 2010 and 2014, as subsequently amended or replaced.
- Inform the borrower of his / her right to submit an appeal to the Appeals Committee as well as the appeals process.
With the aim of informing the public regarding this subject, the Central Bank provides in summary form the following information that analyses:
- Basic provisions of the Code that the borrowers should be aware.
- Important steps to be followed by a borrower who is experiencing financial difficulties.
Appeals process with regards to restructurings via the Appeals Committee
Based on this Directive, the Bank has adopted an Appeal Process mechanism and has established an Appeals Committee, for the impartial handling of the appeals received by borrowers, who fall within the scope of application of the Code, in relation with restructuring of credit facilities.
Borrowers who wish to submit an appeal must do that in writing by filling out the Submission of Appeal on Restructuring Form (001-01-1888), available here. The form is also available in all bank branches.
The form should be completed in full, signed by the borrower, and sent with all supporting documents either:
- By post in a sealed envelope to the following address: PO BOX 21472 – Secretary of the Appeals Committee, or
- Via e-mail to email@example.com
According to the Directive, the Bank will provide the borrowers with an official acknowledgement of the appeal, which may not be later than twenty one (21) days from the date of receipt of the complaint, and an official decision of the Appeals Committee, which may not be more than two (2) months from the date of receipt of the appeal.
If, in the period between the submission of the appeal and the receipt of the decision of the Committee, the borrowers wish to be informed on the progress of their appeal, they may contact the 1Bank Call Center / Telebank, which shall respond within twenty four (24) hours.
The Appeals Committee has the right to invite the borrower who filed the appeal for a meeting as well as the obligation to have a meeting with the borrower should he / she request for such a meeting.
Mediation Procedure via the Financial Ombudsman
The borrower has the right if he / she wishes to submit a written request to the Commissioner of Financial Disputes Resolution (Commissioner) for the appointment of the Mediator in relation to the restructuring of credit facilities provided that the total contractual obligation of the borrower does not exceed three hundred and fifty thousand euro (€ 350.000 ) and is secured by a mortgage or collateral assignment over a property used as a main residence (resident owner for a period of at least six months per year).
The application for appointment of the Mediator can be submitted within 14 working days from the day:
- The borrower shall submit the "Personal Financial Statement" (PFS) to the Bank or
- The Bank shall submit to the borrower the "Letter of Offer" / "Letter of negative decision” for the restructuring of credit facilities.
The duration of the mediation process shall not exceed 1 month, the cost for the use of the Ombudsman's services does not exceed five hundred euro (€500) and is allocated 80% to the ACI and 20% to the borrower.
Additional information can be found below:
Contact details for the Commissioner of Financial Disputes Resolution:
ADDRESS: 13, Lord Byron Avenue, 1096 NICOSIA.
POSTAL ADDRESS: P.O. Box 25735, 1311 NICOSIA.
TELEPHONE: 22848900 (central number)
FAX: 22660584, 22660118