We must help the lenders
It will be a mistake to consider that our banks/financiers are doing okay, especially bearing in mind the increased strict standards that are introduced from time to time by the European Central Bank.
I say this since we are now in an election period, and our MPs and political parties are bidding against each other to see who will offer the best deals to the debtors.
I do not think that the former Irish bank investors expected what they are faced with now in Cyprus. We have a lot of debate regarding the protection of the primary residence (be it quite a humanitarian measure), but then we have expensive villas worth in the millions, which nowadays have a very limited demand and most difficult sale prospects.
In order to be more in line with the prevailing situation we must not forget how we came about this disaster of 3/2013. The main ones to blame are the Christofias Government (spend and spend) and the banks themselves who took all sorts of decisions regarding the Greek toxic bonds, as well as the Governor of the Central Bank at the time who did not exercise the due diligence and supervision of the banks. End result is the demolition of the Cyprus Popular Bank and the loss of the people’s deposits, as well as those (to a small extent) at the Bank of Cyprus.
So, no doubt we have debtors unable to pay (the NPLs etc). The banks are also to blame, although the existing shareholders of responsibility.
So, here we are blaming the banks for everything, but are the lenders up to it to meet this unpredicted situation? Some financiers are trying to resolve the situation – as is the case of the Bank of Cyprus which is still searching to find a way out of their own financial situation and the loss of the investment by the incoming new investors.
We are particularly worried for the Co-Op Bank which is troubled by the small politics of the parties, whereas other lenders seem to be doing little about the NPLs.
Some of the foreign consultants who have been taken on board to handle the NPLs and sale of securities, notwithstanding their 6 month appointment, are still not properly set up and time passes as nothing is happening.
Sale of NPLs
It is a must since the lenders’ job is not to sell real estate but financing. An attempt has been made by the Bank of Cyprus of group sales, whereas the others are still at the preparatory state.
Taking over of projects/properties be it on an individual basis or otherwise is another option. An NPL, say, of EUR 5 mln which cannot sell, but given added funding on behalf of the financiers to complete the project under its own company or the banks supervision, is another solution,n provided it works financially.
The grouping of attractive investments and the not so attractive ones as one sale is another option – for example, the sale of an attractive investment (property) for EUR 3.0 mln, plus EUR 500,000 for the not so attractive ones, is another option in order to get rid of the non-attractive properties.
There are plots/land that are adjacent to each other, but are under mortgage by different financiers. Such properties, provided there is a cooperation by the various lenders, could offer a better deal if sold as one. This is especially true in the case of agricultural land in the Famagusta region, and the wine producing villages (lack of land by the wine producers) which can prove to be for everybody’s benefit.
Financing the new buyers
Not a must as such, but financing worthy new clients is a point in hand. The financiers have excess deposits which must be given out. Attractive terms and a long repayment period is another solution which will help.
High end developments
Must be watched most carefully by the lenders who in their effort to finance and based on the “boom” for such projects especially is worrying since the passport measure may not last for more than 1-2 years, especially after the recent E.U. warning and the intention of this Government to place new measures and restrictions.
Are the financiers up to the quality of the administration required regarding real estate? Based on our own experience they are not all up to it to a satisfactory extent. Many of the staff have limited experience on how to handle real estate matters, whereas others are taking it easy, with no immediate response.
The real estate market will improve once the lenders improve themselves and the two go hand in hand, while by knocking the banks we are knocking the Cyprus economy and the real estate market.