We must help the lenders

Financial Mirror (Cyprus) - - FRONT PAGE -

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

the

Buy­ers Fund­ing

Cypriot

Group In­vest­ments

banks

are

the

least

to

bear

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.

Fi­nanciers Co­op­er­a­tion

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.

Ad­min­is­tra­tion Qual­ity

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.

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