Cyprus banks ‘no longer part of the problem’, says Georghiades

From being part of the problem, Cypriot banks are becoming part of the solution, Finance Minister Harris Georghiades told the Association of Cyprus Banks annual meeting.

In his address, Georghiades recalled the dramatic moments in the banking sector during the financial crisis 0f 2012-2013. Cyprus’ oversized ailing banking sector forced the government to request a bailout to restore financial stability. As part of the bailout terms, the second largest bank was wound down with its local operation merged with the island’s largest lender, whose uninsured depositors were subject to a bail-in.

“Today, from part of the problem, the banks are becoming part of the solution,” the Minister was quoted by the Cyprus News Agency as saying, pointing out that with increased capital buffers and new executives the banks have reinstated confidence in the banking sector and the country as well.

In short, he added, the banks can contribute to the recovery and growth of our economy, a growth should be sustainable relying on innovative entrepreneurship, investments and productive efforts, and not a growth relying on big fiscal deficits by the state and excessive lending by the banks.

Wim Mjis, President of the European Baking Federation, also highlighted the “significant progress” achieved in the Cyprus banking sector in recent years.

“The level of non-performing loans in Cyprus is declining consistently, that is fact that cannot be denied,” he said, adding that “close cooperation is paying off, as is your introduction of codes of conduct that govern the interactions between banks and indebted customers which make it possible to set priorities and facilitate the triage of customers,” he said.

On his part, George Georgiou, the outgoing ACB President, noted that the Cypriot banking sector is faced with a new state of affairs, that emerged from the revamp of the banking sector and the banking crisis and the stricter regulatory framework.

“The conditions of the past at every level have completed their cycle. Essentially today we are experiencing the creation of a new state of affairs in the banking sector,” Georgiou said, adding that the Association looks forward to a more increased reduction of the NPL levels as the economic environment is improving.

Michalis Kammas, the Association’s Director-General, said that during the crisis the banking sector has shown resilience, adding however that no complacency could be justified.