CBC chief calls for ‘radical measures’ to slash NPLs
The Cypriot banks should take more radical measures to reduce their high stock of non-performing loans (NPLs) as the tool of restructurings is not enough, CDentral Bank Governor Chrystalla Georghadji told House Finance Committee on Tuesday.
Georghadji said that the Singe Supervisory Mechanism (SSM), which as of November 2014 assumed the supervision of Cyprus’ systemic banks (Bank of Cyprus, Hellenic Bank, the Cooperative Cyprus Bank and RCB Bank) is not exhibiting the same patience as the Cypriot authorities concerning the reduction of NPLs in the Cypriot banking system, which amount to 46% of total loans.
“Unfortunately, (the SSM) cannot wait and does not accept a slow reduction of NPLs and is requesting immediate measures,” she said, according to the Cyprus News Agency.
She noted that the CBC and the European Central Bank are trying to find effective solutions to deal with the problem of NPLs, adding that this effort has intensified as it is acknowledged that the delay in tackling the problem is detrimental to all stakeholders with possible adverse consequences to the economy.
Georghadji referred to the slow pace in loan restructurings, noting that this deceleration is associated with the high stock of terminated loans which amount to 50% of total NPLs, currently amounting to EUR 22.4 bln.
“The pace of NPL reduction presents a downward trend and this is a sign that the NPL portfolio cannot be tackled with restructurings alone,” she said.
According to Georghadji, since end-2014, NPLs declined by EUR 5.5 bln or by 20%, while by June 2017 NPLs declined by EUR 1.5 bln year on year. But she noted that loan deleveraging exceeds the pace of new loans, resulting in a negative growth in total loans in the region of 1.8%
On the Cypriot economy, the CBC governor said that after the continued recession that lead to the financial crisis of 2013, the Cypriot economy recovered showing economic growth in 2015 and 2016, while the Cypriot GDP will expand by 4% in 2017 exceeding the CBC’s projections issued in last June.
“On the basis of the recent economic developments, such as the results of the first half and the excellent tourist season, the macroeconomic projections are upgraded in the context of the CBC’s current projection cycle which will be completed in December 2017 and the GDP is expected to increase by 4%,” she said.
On unemployment, Georghadji said the jobless rate is expected to decline to single digits by 2018 from the peak of 17.6 in 2015.
She also said that high private debt amounting to 339% of GDP is obstructing new loans, as both corporations and households continue deleveraging.
Meanwhile, the central bank announced that total deposits in October recorded a net increase of EUR 335.1 mln, compared with a net decrease of EUR 164.9 mln in September. The annual growth rate stood at 3.4%, compared with 3.6% in September 2017. The outstanding amount of deposits reached EUR 49.5 bln in October 2017, the CBC data showed.
Total loans in October saw a net decrease of EUR 110 mln, compared with a net decrease of EUR 134.6 mln in September. The annual growth rate stood at -1.7%, compared with -1.8% in September. The outstanding amount of loans reached EUR 52.5 bln in October.