Trust in banks at lowest level since 2013 crisis

Cypriots have cast a vote of no-confidence in the banking system according to a survey conducted by online financial news site Stockwatch.

Local banks have garnered the lowest level of trustworthiness since the collapse of Laiki Bank during the 2013 bailout, exhibiting that scars from the island’s near banking collapse have deepened with liquidation of the Co-op, the second bank to disappear in just five years.

The survey, the 17th to be conducted since 2013, records an abrupt decline of confidence in July following a deal in which Hellenic Bank acquired the healthy parts of the troubled Co-op.

The Stockwatch survey involving 600 households, showed Cypriots giving the banks a fail grade with an overall 4.48 out of 10, while the previous survey in March, saw banks scoring a higher 5.39.

The 4.48 score is the worst recorded by Stockwatch since February 2013 when it launched its banking survey. Trustworthiness then stood at 4.69.

Taking the fears surrounding the Co-op out of the equation, the banks’ credibility rating was 4.75 – about the same level as in not making the grade when it comes to their trustworthiness.

The source argued that public sentiment has been negatively influenced by the developments and the uncertainty around the closure of the Co-op.

The source said that people were and are still living with some uncertainty as to what will happen with their accounts at the Co-op which will eventually close and be absorbed by Hellenic.

“Many people had taken out their savings and did not re-deposit them in another banking institution until the deal was done,” said the source.

The banking sector believes that people’s confidence will gradually return and that the contribution of the NPL management body to be set up by the state will play a decisive role.

“If the ESTIA scheme will provide the solutions which it promises, at least on paper, and people do not lose their homes, while at the same time banks see their NPL portfolios go down, then confidence towards Cyprus’ banking system will be restored even quicker than expected,” said the source.