CBC Gov­er­nor: “It will take 3-5 years for NPLs to fall to 10%”

Financial Mirror (Cyprus) - - FRONT PAGE -

Cen­tral Bank of Cyprus (CBC) Gov­er­nor Chrys­talla Ge­orghadji that based on the in­ter­na­tional ex­pe­ri­ence, it will take three to five years with a growth rate of ap­prox­i­mately 3% for non-per­form­ing loans (NPLs) to fall from 47% to­day to 10% of the to­tal loan port­fo­lio.

Brief­ing the House Fi­nance Com­mit­tee, Ge­orghadji said that the CBC re­quested the as­sis­tance of In­ter­na­tional Mon­e­tary Fund (IMF) to ex­am­ine how much time it will take to re­duce NPLs at a low rate. She said that the IMF replied that it would take three to five years for NPLs to fall to 10% of the to­tal loan port­fo­lio.

How­ever, she ex­plained that in her opin­ion a growth rate of around 3% of GDP would be needed to see sub­stan­tial re­duc­tion of NPLs.

In re­la­tion with the growth rate, Ge­orghadji said she expects that GDP will record an in­crease of 1.5% or big­ger in 2015 and at least 2 % in 2016.

Point­ing out that the up­ward trend of of non-per­form­ing loans has been re­versed, she pro­vided data ac­cord­ing to which loan re­struc­tur­ings in­creased by 58% dur­ing the third quar­ter of 2015. Loans that have been re­struc­tured by Septem­ber 2015 amounted to EUR 14 bln, of which 10.5 bln are still con­sid­ered as NPLs ac­cord­ing to the Di­rec­tive of the Euro­pean Bank­ing Author­ity, say­ing that the re­struc­tured loans are cal­cu­lated as NPLs for a year.

Re­gard­ing the al­lo­ca­tion of new loans, she said that in 2015 busi­ness loans in­creased by 3.1%, while the grant­ing of hous­ing loans in­creased sig­nif­i­cantly.

Re­call­ing that the lend­ing rates were re­duced by 1%, a fact that helped the de­mand for new loans to in­crease, she added how­ever that de­mand re­mains weak. At the same time she stressed that high lend­ing rates is a “Gor­dian knot”, and added that “we must not forget that we are a coun­try that has not re­gained the con­fi­dence, thus many of the loans are risky.” The aim, said Ge­orghadji, is to fur­ther im­prove the speed and sus­tain­abil­ity of loan re­struc­tures.

She also said that the CBC will soon post a dig­i­tal plat­form on its web­site, which will al­low bor­row­ers to mon­i­tor their loans and com­mu­ni­cate with the bank to re­quest re­struc­tur­ing so­lu­tions.

Ac­knowl­edg­ing that CBC needs re­or­gan­i­sa­tion, re­struc­tur­ing and cor­po­rate gov­er­nance, the Gov­er­nor said that be­tween De­cem­ber 2 and 10 an IMF team will be in Cyprus to pro­vide tech­ni­cal as­sis­tance and rec­om­men­da­tions on cor­po­rate gov­er­nance.

Asked how her re­la­tions are with the Pres­i­dent of the Repub­lic, Ge­orghadji said that her re­la­tions with the Pres­i­dent are “very good.”

“And I am not aware of any­thing else that dif­fer­en­ti­ates th­ese good re­la­tions. I ought to have th­ese good re­la­tions,” she said.

Last May, Pres­i­dent Ni­cos Anas­tasi­ades said he would move to file an ap­pli­ca­tion for the dis­missal of Cen­tral Bank (CBC) Gov­er­nor Chrys­talla Ge­orghadji with the Supreme Court, af­ter al­le­ga­tions that the Gov­er­nor had al­tered her con­tract and that there was con­flict of in­ter­est aris­ing from her daugh­ter rep­re­sent­ing ex-Laiki boss Andreas Vgenopou­los, while Ge­orghadji was the head of the res­o­lu­tion author­ity that took over now de­funct Laiki.

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