A legislative proposal tabled at the House finance committee aims to make commercial lenders criminally liable for loan-sharking, but the Central Bank of Cyprus (CBC) is advising against it.

MPs want to amend the criminal code so that banks and their officers are no longer exempt – as they are currently – from liability for this practice.

Lawmakers are considering excluding credit cards from the list of bank products that would come under the proposal.

The CBC has warned that the bill is tantamount to violating the terms of the memorandum of understanding Cyprus concluded with its international lenders. Under the MoU, authorities here undertook not to introduce any new administrative measures that might interfere with setting banks’ lending rates and to avoid introducing a cap on bank lending rates.

The legislative proposal aims to amend the meaning of ‘reference rate’ so that it is defined as the average annual rate of 10 EU member-states who are part of the eurozone, plus a charge of 2.5 percent at the most, including other levies and legal fees charged by banks for consumer loans.

This, the CBC argues, would result in confusion, as the definition of the reference rate would depend on which 10 EU member-states are referenced, as well as who decides which countries are referenced and whether Cyprus would be included on that list.

Previously asked for its feedback on the bill, the European Central Bank has reportedly said it is up to individual member-states to decide on criminal measures against banks.

Responding to the CBC’s and the banks’ reaction to the bill, Greens MP George Perdikis railed against the bankers.

“Parliament has a duty to take this small, symbolic step because the banks have hit rock-bottom when it comes to accountability. Their impunity and immunity in this country have led them to behave like satraps, doing whatever they want.”

Also on Monday MPs discussed a bill introducing leasing as an alternative method of borrowing.

The committee has not yet reached consensus, its acting chair Angelos Votsis said later, but MPs have identified the points of difference so that they hope to pass the legislation in two weeks’ time.

The main point of contention, he said, regards the length of time when an owner of a property – a bank or lessor – can take back the asset which is being leased if the user is not being consistent with payments.

The goal is for the lessor to be able to take back the asset within six months in the case of movable property, and within 1.5 to 2 years where real estate is involved.

The committee is also discussing separate bills that are designed to facilitate the practice of leasing through tax incentives.

Lessors and lessees would be exempt from capital gains tax. In addition, as part of a leasing arrangement, the parties to it would be exempt from paying the special defence contribution.