Cyprus’s banking sector has raised strong concerns over legislative proposals currently under discussion that would amend the framework governing property foreclosures.
In a note submitted to parliament ahead of discussions in the House finance committee, the Cyprus Banks Association warned that the adoption of the proposed legislation could have negative consequences for credit institutions, the stability of the financial system and potentially the credit rating of the Cypriot economy.
According to the association, “the possible adoption of the proposed laws would have negative effects on credit institutions, the stability of the financial system and potentially the credit rating of the Cypriot economy, as they would suspend the timeline and procedures for property foreclosures.”
Risk of delays in debt recovery
The association stressed that the current framework already contains reliable procedural safeguards.
In cases where there are legitimate grounds to suspend foreclosure proceedings, borrowers can seek a court injunction. They can also appeal to the Financial Ombudsman through the out-of-court financial dispute resolution body to examine issues such as charges, abusive clauses and mediation.
The Cyprus Banks Association warned that repeated attempts to amend the foreclosure framework through various legislative proposals risk rendering the process ineffective.
“Continuous efforts to modify the foreclosure framework through various legislative proposals risk making the foreclosure procedure ineffective and inefficient, complicating the recovery of debts due to the lengthy delays already faced in the courts,” the note said.
Private debt remains a major challenge
The association also highlighted that the management of Cyprus’s high level of private debt continues to be identified as the economy’s main challenge in reports by credit rating agencies, the European Commission, the International Monetary Fund and other international institutions.
“The problem of very high private debt requires a holistic approach and a definitive settlement,” the association said.
It added that most of the debt in question does not stem from recent lending but from long-standing non-performing loans that have been in default for decades, have already been terminated by banks and in many cases are currently the subject of court proceedings or court judgments.
According to the association, the key to resolving the issue lies in the borrower’s financial viability, their ability to repay the debt and their willingness to cooperate in reaching a settlement.
“Suspending foreclosures and prolonging court proceedings is not a solution and does not resolve the problem,” the association said, adding that such delays prolong uncertainty, postpone any settlement and keep borrowers outside the banking system.
Limited use of dispute resolution mechanism
The association also expressed concern over the limited use of the out-of-court dispute resolution mechanism introduced through amendments adopted in 2023.
Under the revised framework, borrowers can apply to the Financial Ombudsman to verify the outstanding amount of their debt, during which time foreclosure proceedings can be suspended.
However, according to data from the Financial Ombudsman, the mechanism has seen little use.
In 2025, around 200 requests were submitted for suspension of foreclosures, but only six requests were filed for examination of the outstanding debt amount.
Five of those requests were rejected because court judgments had already been issued, while the remaining request was withdrawn by the applicant before it could be examined.
The association noted that it would have been expected that the borrowers who applied for foreclosure suspensions would also submit requests to the Financial Ombudsman to determine the amount owed, since this is the issue most frequently disputed by debtors.