Keravnos warns against foreclosure measures that risk credit ratings

Finance Minister Makis Keravnos and opposition figures signalled growing political alignment on foreclosure policy, even as the government rejected calls for a blanket suspension.

The emerging cooperation between Disy and Diko builds on their earlier joint backing of tax reform and is expected to extend to foreclosure legislation, according to a report by Philenews.

The issue came into focus following a meeting between Keravnos and Disy president and House speaker Annita Demetriou, where both sides appeared to converge on maintaining economic and financial stability while updating the legal framework.

“We cannot risk the stability of the economy and the financial sector,” Demetriou said.

She added that the legal framework governing foreclosures must be modernised in a balanced way, echoing the government’s position that social policy should remain the responsibility of the state.

During the meeting, Disy raised the possibility of reinstating the rent-for-installment scheme, aimed at supporting vulnerable borrowers.

At the same time, Disy and Diko are preparing to jointly promote two legislative proposals, with the former party focusing on strengthening protections for guarantors and the latter party proposing the appointment of special judges to examine loan balances, outstanding debt and potentially abusive clauses.

With backing from other parties including Edek, Dipa and independent MPs, the Disy proposal is expected to secure parliamentary approval.

However, it remains unclear whether the government will support both legislative proposals, as legal and constitutional concerns have been identified in certain provisions.

The Central Bank of Cyprus (CBC), the Association of Cyprus Banks and credit-acquiring companies have already expressed disagreement with aspects of the proposals.

In addition, the Legal Service has raised objections to Diko’s proposal, given its central role in implementing any system involving special judges.

The cooperation between Disy and Diko is expected to become clearer during an extraordinary session of the parliamentary finance committee on Thursday, where both parties are due to present their positions.

The meeting, initially planned to take place behind closed doors, will instead be held in the presence of the finance minister and central bank governor, who are expected to comment on the proposed framework.

The developing alliance is likely to trigger reactions from other political parties, which are seeking to advance their own legislative proposals before the self-dissolution of parliament in April 2026.

Keravnos, for his part, reiterated the government’s opposition to sweeping measures, insisting that blanket interventions on foreclosures are not appropriate at this stage.

“We are being monitored by rating agencies, we are being monitored by the European Union and the institutions from which we have borrowed and which assess us,” he said earlier this week.

“Therefore, horizontal issues regarding foreclosures, with a freeze of foreclosures at this time, should not be discussed,” he added.

Instead, the minister stressed the need to strengthen existing institutional mechanisms, particularly the role of the financial commissioner.

“We must strengthen the role of the financial commissioner so that we resolve problems without putting our economy at risk,” he said.

The government has already moved in this direction, having approved a package of measures aimed at enhancing debt restructuring processes and protecting primary residences.

These include two draft bills submitted to the legal service for technical review, introducing a new mechanism for verifying borrower debt and determining repayment terms.

The reforms would allow borrowers to access the financial commissioner earlier in the process, upon receiving an initial notification rather than a later formal notice.

They also provide additional time for debtors to explore restructuring options and avoid foreclosure, including the possibility of referral to an insolvency counsellor to prepare a personal repayment plan.

Under the second bill, decisions by the financial commissioner in disputes involving up to €20,000 would become legally binding, covering a significant share of cases.

The minister described the reforms as a targeted effort to address a major social concern, while avoiding measures that could undermine financial stability.

Keravnos also framed the approach as being in the common interest of both borrowers and lenders, warning that unresolved disputes risk prolonging financial pressure and delaying recovery.