CBC tells banks to restart lend­ing and kick-start econ­omy

Financial Mirror (Cyprus) - - FRONT PAGE -

The Cen­tral Bank of Cyprus has called on the bank­ing sys­tem to re­sume its lend­ing role and help kick-start the ail­ing econ­omy.

In its monthly eco­nomic bulletin for De­cem­ber, the cen­tral bank said that the suc­cess­ful com­ple­tion of the Euro­pean Cen­tral Bank stress tests by four lenders in Oc­to­ber “is one of the most favourable de­vel­op­ments of the past year.”

This, and the im­ple­men­ta­tion of a num­ber of re­forms, “re­po­si­tions the bank­ing sys­tem on healthy foun­da­tions and gives the op­por­tu­nity to the bank­ing sec­tor to fo­cus on its ba­sic role and con­trib­ute de­ci­sively to the eco­nomic re­cov­ery of Cyprus,” the CBC monthly re­port said.

“The healthy and suf­fi­ciently cap­i­talised banks will be in a po­si­tion to pro­vide vi­able loans to house­holds and small to medium sized en­ter­prises that are the driv­ing force of the coun­try’s eco­nomic ac­tiv­ity.”

The CBC re­port added that the sys­temic lenders have raised their cap­i­tal­i­sa­tion lev­els to “a very sat­is­fac­tory, un­der the cir­cum­stances, de­gree with prospects of fur­ther strength­en­ing, while the bank­ing reg­u­la­tory and su­per­vi­sory frame­work has also been en­hanced.”

The big­ger banks, it said, are pro­ceed­ing with their re­struc­tur­ing plans, while the in­tro­duc­tion of cor­po­rate gov­er­nance has im­proved and the changes will be on­go­ing.

After th­ese de­vel­op­ment, the CBC said that it will be able to con­cen­trate its ef­forts on the re­struc­tur­ing of loans, which “should be rea­son­able, fair and vi­able”, which will on the one hand help lower the level of non­per­form­ing loans (NPLs) and on the other have a pos­i­tive im­pact on in­ter­est rates and the eco­nomic cli­mate in gen­eral.

As re­gards the real econ­omy, and in par­tic­u­lar the rate of change of the real GDP, the de­vel­op­ments, although still neg­a­tive, seem to be bet­ter than ex­pected, CBC said.

While the pre­dic­tions within the con­clu­sions of the fifth re­view of the eco­nomic adjustment pro­gramme with the Troika of in­ter­na­tional lenders in June had ex­pected a re­ces­sion of 4.2%, the most re­cent re­vised reviews of the IMF and the Euro­pean Com­mis­sion see a con­trac­tion of real GDP by 3.2% and 2.8%, re­spec­tively. Ac­cord­ing to the lat­est data, the CBC es­ti­mates this con­trac­tion to end up at 2.6%.

Dur­ing their fifth re­view, the in­ter­na­tional lenders pre­dicted a pub­lic sec­tor deficit in 2014 of 4.7% of GDP. How­ever, this es­ti­mate has al­ready been sur­passed, as ac­cord­ing to the re­vised IMF and EC pro­jec­tions the sur­plus is seen at 4.4% and 3%, re­spec­tively.

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