Governor Georghadji wants banks to take radical NPL action

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By Stelios Orphanides

Cypriot banks need to take more radical action to reduce their mountain of delinquent loans amid a slowdown in restructurings even as economic growth is expected to reach 4 per cent this year, the Cyprus News Agency (CNA) reported on Tuesday citing Central Bank of Cyprus’s governor Chrystalla Georghadji.

Georghadji, who was talking to lawmakers at parliament’s finance committee, said that the reduction in loan restructurings was partly on an increase in terminated loans which account for roughly half of non-performing loans, according to the CNA.

She added that the drop in the pace of loan restructurings was an indication that restructurings alone cannot tackle the problem, Georghadji said.

In July, non-performing loans stood at €22.4bn or 45 per cent of total loans, according to the latest official figures. The amount of restructured loans was €12.7bn of which only €8.9bn was being regularly serviced. The amount of accumulated provisions of Cypriot lenders stood at €10.5bn.

The governor warned again of the vulnerabilities and shocks the Cypriot economy –which emerged in 2015 from a prolonged recession–, and the island’s banking sector face. The economy expanded last year a revised 3 per cent and grew in the both the first and second quarter an annual 3.5 per cent or more. The Central Bank of Cyprus’s earlier forecast for this year’s growth was 3.1 per cent.

She also warned that while debating about the banking sector in the current presidential election campaign is fair, it could potentially “undermine everything we achieved so far,” the CNA reported.

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About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]

  • Philippos

    I’m sorry Mrs G, you really cannot do this in a hurry without destabilising the market once more, if a repercussion might be the dumping of a load of cheap real estate onto the markets all at once. It risks putting more recent lending underwater, as values drop once more and just adding to the problem. Restructuring is good, but so is quarterising no hopers and maybe putting some of the more viable stuff into funds, so that the Banks take in some money for “Units” instead of even more dumping into the Real Estate Markets

    • alexander reutersward

      might be better to correct the market once and for all, property in area with a demand won’t fall, and property in area’s with no demand will show it’s real value and people purchasing it will be able to afford paying the mortgage.

  • divadi bear

    I find that many here overspend. I also think that the banks do NOT make a calculation of how much a family needs to live, (including mortgages), before customers are given loans.
    In many other EU countries, a means test is carried out to test people applying for loans. Seasonal workers are particularly not suitable to lend to as they seldom Save while earning high salaries to compensate when their salaries are low or even “non existent, in off seasons”, The first thing they cut are their repayments to the banks giving no thought to how much more interest they will have to pay.
    How many do you see riding in expensive cars, living in houses which are, “owned by the banks”, and their kids with the latest cult-clothes and newest electronic games, all really owned BY the banks.
    Very few Cypriots know how to budget and land on the NPL-List when the high seasonal salaries are no longer paid !
    The losers here are the people who pay their way through money they have deposited in the banks and have to take a low interest rate on their money.

  • Bernard Smart

    Its never going to happen Chrystalla.
    Too many people living in big houses and driving flash cars who cant afford the repayments for either.
    Too many companies trading while insolvent.
    And then there’s the election!

    • Neroli

      Have any of the lawmakers paid any of their loans, maybe start foreclosing on these trough feeders first!

      • Barry White

        In that case Ms. N., hold your ears, the squealing will be deafening..

        • Neroli

          It sure will! I would love to hear them!

  • costaskarseras

    These Cypriot banks, are they not the banks which were rescued from going bankrupt by the people? As for the so-called delinquient loans, the faults lies completely with the bankers who were distribiting people’s life savings in an irresponsible manner and not with the victims of the economic mayhem caused by the bankers. Who excercised more economic responsibility and prudence, the bankers or the hard working people who took out a mortgage to provide a home for their families?

    Action should be taken so that not a single family’s home is expropriated from people, Some. who became refugees after the Turkish invasion this would be the second time that they would lose their homes. Enough sacrifices for the sake of the bankers now is the time to save people’s homes.

    • cyprus observer

      The hard working people you refer to should have first thought through the issue of financial responsibility and not extended themselves into ridiculous levels of debt compared to their income streams. It’s normal to think about what you can afford.

      • westspoon

        Hear hear !

      • divadi bear

        cyprus observer.
        Exactly what I wrote in my comment !

      • Evergreen

        Well said.

    • Bob Ellis

      Total lack of regulation, and even collusion in places, brought about this situation. The governments you actively defend, with the true turd on the top of the cess pit pie being our beloved Toff, bought votes by allowing the people to become ‘debt’ rich. The electorate today blames todays government for the current situation when they should look at how easily they gave their votes away over the past 20 years on the promise of debt.

      • costaskarseras

        May I inform you that the total lack of regulations originated from the neo-liberal policies pursuit by the EU which also apply to Cyprus. These catastrophic effects occur around the world. 43 million US citizen are relying on food stamps to survive and many are without healthcare. Last Sunday at midday I went to London’s West-End and coming out of the Leicester Square Station was a man lying on the floor with his dog and a poster on the wall behind him was advertising the play “Labour of Love”. Opposite, towards Piccadilly Circus, another man was begging. Walking towards Trafalgar Square three people were asleep on the pavement and another person was asleep on the doorstep of the Noel Coward Theatre. On the Strand you could see several homeless people on the door steps sheltering from the cold. Surely, you are not claiming that these tragic events are taking place in rich countries because of the policies of then Cyprus President Christofias

        • Bob Ellis

          Firstly Cyprus has never conformed to any of the EU policies.
          Secondly what happens in the US and London is of no interest to me.
          Lastly, events in the US and UK were not caused by comrade TOFF, he screwed Cyprus and Cypriots like his predecessors with some still foolishly thing he was a God….

          • costaskarseras

            Allow me to inform you that the comments are of interest to many people and give us the opportunity to exchange views and experience of the countries where we live. Do you honestly want me to look the other way and ignore the suffering of some of my fellow citizens when in the fifth richest country even children go to school hungry? Cyprus may be an island but it cannot isolate itself from the ruthless neoliberal policies. If you think that is right that only eight people possess the same wealth as the poorest half of the world’s population. This mind-boggling concept is extremely surprising and very difficult to understand.

          • Bob Ellis

            Placing comments in a local paper, in the country you don’t live that talk about what is supposedly wrong in the world is utterly pointless. Cyprus (the subject of the article) has been screwed by it’s own greed and total lack of governance. Coupled with a fairly unifromed and politically undeveloped electorate this part of its history was always on the cards. Tolution for Cyprus is fairly obviois and trying to blame some global conspiracy or belief system only detracts from what has to be done.

  • dave

    The first step to avoid a collapse in the property market, is to make a call on all guarantors

    They will just have to sell their shares

    • Barry White

      “They will just have to sell their shares….” and reduce their foreign bank accounts and other local bank accounts, UK property and businesses along with the other assets built up through NPL`s.

  • Bob Ellis

    Too little, too late. Which bank fails next ?

  • konstabo

    she wants banks to take radical actions , heres one for you , why dont you return the money you stole from your customers to save yourself when you went bankrupt due to your incompetence and thus set an example for others to follow….

    • konstabo

      think about all the bills people have to pay and now they dont have the money to pay them , think of maybe how people may have medical problems and dont have the money to go to the doctors , try to think about these things and miseries you caused to others to save yourself without even a second thought and without loosing any sleep while you now expect others to hurry up and pay up to the bankers who took no losses on themselves hallelujah……

  • costaskarseras

    It is sad that some people ignore the prevailing conditions and are mean and cruel to the suffering of their fellow human beings. They put the people who lost their jobs or because of ill health became unemployed or their new jobs pay miserably low wages in the same basket as those whose enjoyed an extravagant life style. Recently, I read about a couple from Empa with serious health problems. The husband has a heart condition and the woman is suffering with cancer. When they borrowed money they were in good health and had jobs but when they were unable to work they lost their house worth €200 000 because of a 64,000 mortgage which they could not service.

    • Mist

      Insurance to protect the loan would have been sensible.

    • Pc

      The cases you quote are the exception, not the rule. If you look at the website of Bank Of Cyprus for properties the bank has seized because of default, you’ll see luxurious villas worth €400,000 or more where the former owners simply stopped paying because they overextended themselves.