January 24, 2020

Cyprus ESTIA Scheme

The ESTIA scheme (“Scheme”) aims at the protection of the Primary Residency and the mitigation of the issue of non-performing loans (“NPLs”) in the Cypriot banking system. Its implementation is expected to have a positive impact on the resilience of Cyprus Banks by contributing to the deleverage of the NPLs of Cyprus Banks.

The Scheme strives to achieve a socially aceptable solution through fiscal assistance from the Cyprus government to borrowers with NPLs secured by (Eligible) Primary Residence with Open Market Value (“OMV”) of less than EUR350,000 (“EPR”). It is an one-off scheme open to all Cypriot banks and other financial institutions (including Credit Acquiring Companies) ("Banks") that chose to participate. The Scheme relates to NPLs that meet specific criteria and borrowers/owners of EPR who meet specific eligibility criteria. If eligible, the relevant Bank(s) assess the borrower’s repayment ability and gather the supporting information and documents required to assess if the applicant fulfils the eligibility criteria.

Non-performing borrowers that meet certain eligibility criteria will be restructured and granted a state subsidy of 1/3 (“Subsidy”) of the restructured debt. However, the relevant Bank(s) will have to agree to offer to all of their eligible borrowers the restructuring terms of the Scheme in order for their borrowers to be entitled to the Subsidy. If a borrower is eligible in accordance with the Scheme, it repays to the relevant Bank(s) 2/3 of interest and principal repayment on the basis of the terms of the restructured loan. The restructuring solution offered will depend on the collaterals and the contractual amount of the exposures secured by the EPR.

Final approval for participation in the Scheme may subsequently be provided by the Ministry of Labor, Welfare and Social Insurance, as the administrator of the Scheme ("Competent Agency"). The Competent Agency assesses the borrower’s application in line with the eligibility criteria to inform the relevant Bank(s) accordingly.

You can find further details at the website of the Ministry of Finance: https://bit.ly/2RloaqE

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