Cyprus could cre­ate bad bank to help bor­row­ers

Financial Mirror (Cyprus) - - FRONT PAGE -

Co­op­er­a­tive Cen­tral Bank chief ex­ec­u­tive Mar­ios Clerides said last month that the state could buy non­per­form­ing loans from Cypriot banks to help smaller bor­row­ers by es­tab­lish­ing a bad bank.

“For us it is con­ve­nient be­cause we have a lot of loans of this type,” Clerides said in an in­ter­view to state-ra­dio CyBC. “The prob­lem is whether there are suf­fi­cient funds to sup­port this ef­fort”.

He added that the Co­op­er­a­tive sav­ing banks were slow in re­struc­tur­ing non-per­form­ing loans as their staff has to deal with “a large num­ber of smaller loans”.

Cyprus could also use 1 bln eu­ros in bailout money ini­tially ear­marked for the re­cap­i­tal­i­sa­tion of the co­op­er­a­tive bank­ing sec­tor, but re­mains un­used af­ter the CCB suc­cess­fully com­pleted the Euro­pean Cen­tral Bank’s as­set qual­ity re­view in Oc­to­ber.

Cyprus could in­tro­duce a scheme sim­i­lar to that of Ire­land which es­tab­lished the Na­tional As­set Man­age­ment Agency in 2009 which bought prob­lem­atic loans from banks, or a sim­i­lar struc­ture Greece is about to in­tro­duce, Clerides said, adding that this would also re­quire the in­tro­duc­tion of an ef­fec­tive leg­isla­tive frame­work.

The gen­eral manager of the CCB said the or­gan­i­sa­tion saw its de­posits fol­low­ing the com­ple­tion of the ECB’s stress tests in­crease by 330 mln eu­ros.

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