Bank boss says fore­clo­sures will help restart lend­ing

Financial Mirror (Cyprus) - - FRONT PAGE -

Bank of Cyprus CEO John Houri­can told em­ploy­ers that the much-de­layed law on fore­clo­sures must be put in place as this would be an im­por­tant step for lend­ing and fi­nanc­ing to re­sume and kick-start the econ­omy.

The fore­clo­sures bill was sup­posed to have been voted on dur­ing Thurs­day’s par­lia­men­tary plenum, but a de­lay by the gov­ern­ment to sub­mit a par­al­lel frame­work on in­sol­ven­cies irked op­po­si­tion par­ties that in­tro­duced a counter bill post­pon­ing the im­ple­men­ta­tion of the fore­clo­sures, an obli­ga­tion as part of the bailout pro­gramme.

As a re­sult, the Troika of in­ter­na­tional lenders froze pay­ments. This bloated the po­lit­i­cal par­ties’ ar­ro­gance, claim­ing that all they want is to pro­tect the pri­mary homes of low-in­come house­holds from be­ing re­pos­sessed by banks amid high un­em­ploy­ment and in­abil­ity to re­pay mort­gages, push­ing the rate of non-per­form­ing loans (NPLs) to 50% of the na­tional loan­book.

A doc­u­ment leaked last week, al­legedly by the Bank of Cyprus, showed that 29 of the 56 mem­bers of par­lia­ment had NPLs that they had no in­ten­tion of re­pay­ing.

Speak­ing to mem­bers of the Em­ploy­ers and In­dus­tri­al­ists Fed­er­a­tion (OEV) in Ni­cosia, Houri­can said that the bank is re­view­ing ev­ery sin­gle trou­bled loan with the aim to re­struc­tur­ing.

“We want to en­sure that all busi­nesses have a chance to suc­ceed”, he said, re­fer­ring to the re­cent cut in lend­ing rates by one per­cent­age point.

Houri­can said sen­ti­ment in the mar­ket is chang­ing and that “peo­ple want the econ­omy to per­form and we need to change the agenda from al­ways talk­ing about fis­cal con­trac­tion and aus­ter­ity to ac­tu­ally get­ting peo­ple’s con­fi­dence lev­els up to in­vest. So, we have to move the agenda from one of aus­ter­ity to one of pros­per­ity so that we can cre­ate a fu­ture for young peo­ple of Cyprus and in­deed their kids.”

As re­gards cap­i­tal lev­els, Houri­can said that the bank has al­ready re­duced its emer­gency liq­uid­ity as­sis­tance (ELA) from EUR 11.4 bln at the start of the eco­nomic cri­sis in 2013 down to EUR 7 bln, not­ing that “EUR 4 bln is gone so it is pos­si­ble … to fur­ther re­duce the amount” of de­pen­dency on ECB fund­ing.

“To­day we are run­ning very high lev­els of liq­uid­ity in the bank be­cause we are will­ing to lend, we want to lend and also want to keep our­selves safe given the eco­nomic tur­moil around us, whether that is in Europe gen­er­ally, whether it is the shadow cost by Greece, or the shadow cost by events par­tic­u­larly in Rus­sia. We could re­pay a lot more ELA but we are choos­ing to have it avail­able to Cyprus’ econ­omy if we can find some­one to use it,” he said.

Re­tain­ing some of the bank’s cap­i­tal buf­fers and lend­ing to the lo­cal mar­ket in or­der to restart the econ­omy had been a long de­mand by stake­hold­ers, but the man­age­ment had in­sisted on low­er­ing its ELA obligations in or­der to be able to bor­row later at bat­ter rates.

How­ever, with the Euro­pean Cen­tral Bank’s quan­ti­ta­tive eas­ing (QE) pro­gramme un­der­way from this month, the mar­ket ex­pects Frank­furt to sup­port Eu­ro­zone growth by buy­ing up bonds and in­ject­ing fresh cap­i­tal for growth and devel­op­ment through­out the EU. Cyprus can­not par­take in the QE pro­gramme un­til it passes the fore­clo­sures bills and re­sumes its com­mit­ments to the eco­nomic ad­just­ment pro­gramme as part of the EUR 10 bln bailout.

OEV Pres­i­dent Chris­tos Michaelides said af­ter the meet­ing with Houri­can that the bank­ing sec­tor in Cyprus is a very cru­cial and im­por­tant sec­tor in the ef­forts to achieve growth and restart the econ­omy.

“We in­vited Mr Houri­can here to dis­cuss with him and ex­change views on how we could bet­ter as­sist our mem­bers, since this will have a pos­i­tive im­pact on the bank as well”, he con­cluded.

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