The Central Bank of Cyprus issued, on 3 April 2015, the revised Directive on Arrears Management of 2015. This Directive, regulates the arrears management framework and establishes a Code of Conduct between Authorised Credit Institutions (ACIs) and borrowers to whom the Directive applies.
Please see the link below:
Directive on Arrears Management 2015 (2,716kb)
The main purpose of the Directive is to achieve fair and sustainable restructuring of credit facilities of viable borrowers (individuals and businesses) experiencing financial difficulties and who cannot meet their contractual obligations. Under this Directive, credit institutions 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 forms part of the Arrears Management Directive of the Central Bank of Cyprus (Appendix 2 of Directive).
- Banks are obliged to apply the provisions of the Code to the following persons:
- Natural persons granted credit facilities by the Bank 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 Bank for the borrower.
- Micro and small enterprises granted credit facilities by the Bank 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)):
|Enterprise Category||Number of employees||Annual turnover or balance sheet total|
|Micro||<10||< or = € 2 million|
|Small||<50||< or = € 10 million|
|Self Employed||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
The Code of Conduct is:
Procedures that the Bank follows in the case of arrears or pre-arrears
- Pre-arrears communication
Pre-arrears is defined as the situation where the Bank anticipates that there is a material risk of the borrower going into financial difficulties creating arrears in the short to medium term. (due to, for instance, change in employment status, reduction of salaries, pandemic outbreak etc.). The Bank may be made aware of the situation either:
– by the borrower
– or as a result of our own assessment and controls.
Due to the fact that no actual arrears have occurred, the communication with the borrower in pre-arrears should be consultative and focused on identifying relevant preventative measures. Communication shall be performed via phone or in person by his/her/its Relationship Officer, as deemed appropriate.
- Early arrears communication
Early arrears occur when a borrower has not made a full repayment or only makes a partial repayment on the credit facility, up to 30 days following the contracted due date of the repayment program.
– Early arrears communication: Between 7 and 20 days in arrears
If any of the credit facility goes into arrears, there should be telephone contact with the borrower within the first 20 days from the date that the loan has been in arrears. The telephone communication must be of advisory nature and discrete.
– Early arrears communication: More than 31 days in arrears
If the arrears of the loan remain outstanding for 31 days, and the borrower does not respond to an oral arrangement, the Bank will write to the borrower and his/her/its guarantors, if any, in the form of a letter and inform them of the status of the account.
The letter must, among other things, include:
a. the date of start of arrears and amount of arrears;
b. details of charges and interest related to arrears;
c. highlight the importance of cooperating with the Bank;
d. invitation to a meeting for assessment of the Bank and potential restructuring of the credit facilities of the borrower.
- Mid-arrears communication: More than 60 days in arrears
When arrears of any of the credit facilities have reached 60 days and no arrangement has been made or is in progress, the Bank must write to the borrower and his/her/its guarantors, if any, in the form of a letter, setting out, among other things, at least the following:
a. updated information on arrears;
b. details of charges and interest related to arrears;
c. the borrower’s legal obligations to comply with the contractual obligations of the credit facilities;
d. the Bank’s right to initiate legal proceedings in case of further noncompliance;
e. a request by the Bank to communicate with it within 30 days from the letter date for either the settlement of arrears or submission of financial information within a reasonable time period for reassessment of the borrower’s financial situation in order to develop, if feasible, a restructuring plan tailored to the borrower’s circumstances.
- Serious arrears communication: 90 days in arrears
When arrears of any of the credit facilities have reached 90 days and no workout arrangement is made or is in progress, the Bank must write to the borrower and the borrower’s guarantors, if any, again, in the form of a warning letter setting out, among other things, the following:
a. all the information and actions included in the letter of mid arrears (60 days in arrears);
b. inform the borrower that if he/she does not act in accordance with this letter within 30 days from the letter date, the borrower will be classified as “non-cooperative”;
c. outline the implications of being non-cooperative, including the potential for initiation of legal proceedings and for not being covered any more by the code.
The Borrowers may submit their financial information, as explained in the procedures above, by completing the relevant form:
Credit Facility Application and Personal Financial Statement – English / Greek (Click on the link and the excel file will be downloaded on your PC)
Information for the rights and obligations of borrowers, guarantors and security providers falling under the Code
Please click the link below for the rights and obligations of the Bank, Guarantors and Security Providers.
- Guarantors’ and Security Providers’ and Ancoria Bank Rights and Obligations – English (314kb) / Greek (325kb)
Procedure for Submission of Objections/ Appeals
Based on the Directive, the Bank has adopted an independent Appeal Process mechanism and has established an Appeals Committee, for the impartial handling of the appeals received by eligible borrowers, who fall within the scope of application of the Code, in relation with the restructuring of credit facilities.
In case the eligible borrower either rejects the restructuring plan proposed by the Bank or the Bank did not determine a sustainable restructuring plan for the case, the borrower has the right to submit an appeal to the Appeals Committee of the Bank.
Borrowers who wish to submit an appeal must do that in writing by filling out the Submission of Appeal on Restructuring Form, which can be found here: English (204kb) / Greek (348kb).
The form must 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: P.O. Box 23418 – Secretary of the Appeals Committee
- By hand to his Relationship Officer
- Via email to email@example.com
As per the Directive, upon receipt of the appeal, the Appeals Committee must provide the customer with an official acknowledgement of the appeal which may not be later than 21 business days from the date of receipt of the complaint.
An official decision regarding the appeal must be communicated to the borrower within 2 months from the date of receipt of the appeal.
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 relating to the restructuring of credit facilities
The borrower has the right if he / she wishes to submit a written request to the Commissioner of Financial Disputes Resolution (the “Commissioner”) for the appointment of the Mediator in relation to the restructuring of credit facilities.
This applies where the total contractual obligation of the borrower does not exceed € 350.000 (Three hundred and fifty thousand euro ) 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 as provided in the Financial Ombudsman Law L.84(I)/2010:
- Within 14 days from the day the borrower submitted the “Personal Financial Statement” (PFS) to the Bank as provided in the Arrears Management Directive or
- In case the borrower did not submit an application to appoint a mediator within the said 14 days, within 30 working days from the date that the Bank submitted 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, however this period may be extended at the Ombudsman’s discretion for a further 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.
Contact details for the Commissioner of Financial Disputes Resolution:
ADDRESS: 15 Kypranoros Street, 1096 NICOSIA.
POSTAL ADDRESS: P.O. Box 25735, 1311 NICOSIA.
TELEPHONE: 22848900 (central number)
FAX: 22660584, 22660118
- MEDIATION: firstname.lastname@example.org
- ENQUIRIES: email@example.com
Alternative Dispute Resolution Mechanisms
Borrowers have also the right to refer to an alternative dispute resolution entity recognised by an EEA financial regulator. Disputes between consumers and traders may be settled by the Alternative Dispute Resolution (ADR) mechanisms.
More information may be found in the following links of the Consumer Protection Service, Ministry of Energy, Commerce and Industry:
Disputes related to financial services are handled by the following ADR entities, by which Ancoria Bank is covered:
- Financial Ombudsman: www.financialombudsman.gov.cy/forc/forc.nsf/index_gr/index_gr?opendocument
- Cyprus Consumer Centre For Alternative Dispute Resolution: https://adrcyprus.com/en/
Please don’t hesitate to contact us if you have any questions.