Finance Minister trashes ‘baseless’ rumours about financial stability

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By Stelios Orphanides

Finance minister Harris Georgiades dismissed ‘baseless’ and ‘irresponsible’ rumours about measures threatening the Cypriot banking system, adding that Cypriot banks were adequately capitalised.

The minister, who was commenting in response to a question related to alleged panic among depositors who had withdrawn money on fears of a new bail-in on state radio CyBC, said that as the regulatory and supervisory framework in the European Union is getting stricter Cyprus has made progress in reducing both total lending and non-performing loans.

“The stricter framework aims at giving assurances to depositors,” he said, adding “we are not in 2013. The government today is not financially weakened, bankrupt and shut out of markets at such an extent that it could not intervene even if it wanted”.

“Today it can, we have the ways to completely facilitate the consolidation of the banking system so that it can operate safely,” he added.

Cyprus’s banking crisis in which depositors lost €8 billion in total five years ago was also a result of a rapid increase in lending, which went from €28bn at the end of 2005 to €72.5bn seven years later, an increase of €44.4bn. Non-performing loans in the Cypriot banking system stood at the end of 2017 at €20bn, two fifths of total lending, compared with €27.3bn three years before, or almost half.

Total lending fell in January to €51.1bn, according to the latest Central Bank of Cyprus data. In comparison, bank deposits rose in January to €48.6bn from the post-crisis low of €45.7bn March 2016, eleven months after the lifting of capital controls imposed in March 2013. The combination of loan repayments, an increase in deposits and other factors such as the sale of assets allowed Bank of Cyprus, which inherited €11.4bn in emergency funding five years ago from Cyprus Popular Bank, widely known as Laiki, to fully repay it by January last year.

The government, which lost market access in May 2011, managed to successfully issue new bonds over the past years at record low borrowing costs, before and after completing the bailout programme in March 2016. Last year, public debt fell to below 99 per cent of economic output from 107 per cent the year before on a combination of debt repayments and a 3.9 per cent increase in economic output.

 

A Central Bank of Cyprus source who spoke on condition of anonymity said that while the bank supervisor has not witnessed any unusual outflows of deposits recently, certain lenders with excessive liquidity are not actively trying to attract new deposits because this would imply additional cost for them as a result of the minus 0.4 per cent deposit facility rate of the European Central Bank (ECB).

Bank of Cyprus’s core equity tier 1 (CET1) ratio at the end of December stood at 12.7 per cent compared to a minimum capital ratio requirement of 9.5 per cent. In the case of Hellenic Bank, the CET1 ratio was 13.8 per cent in December compared to a minimum requirement of 9.6 per cent and in the case of the Cyprus Cooperative Bank, it was in September 15.2 per cent and versus a requirement of 11.8 per cent.

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About Author

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

  • Rumours of financial stability are baseless. I think he mean’t instability sheesh. (oh and they said don’t panic last time)

  • Barry White

    Head for the exits!!!! Were heading again for ROC bottom.

    Capt’n Harris reports from the cockpit that the ground proximity alarms are going off: ” Whoop, whoop… Pull up, Pull up…”

    2014 seems like only yesterday.

    • When Arthur points out the Black Knight’s injuries, the Knight insists “It’s just a flesh wound!”

    • Peter G

      Run for the hills!!! Run for the hills!!! Barry White says so.

  • JS Gost

    Anyone stupid enough to believe Cyprus banks are safe deserves all they get.

  • Douglas

    The last bank bail in is still fresh in peoples minds and the Banks still do not have any credibility to reassure the public that its business is now healthy,the NPL’s and the warning by the recent EU Bankers visit does not inspire you with confidence.

  • Barry White

    Photo caption contest: ” Is my nose getting longer?”

    • Peter G

      Post a photo so we can tell.

      • we ?

        • Peter G

          Why, don’t you want to participate? I suppose not, you two are a pair, no?

          • Barry White

            LOL Peter G. It looks like you need to grow a pair.

          • Peter G

            I got a pair, thank you; didn’t yours drop?

            But I will spell it out for you: I can’t help but keep mental track of the postings of various “commentators” and noticing patterns. There are small groups of trolls that seem to be the same person because they always post together, in the same style, often congratulating “each other,” to a crescendo. The “Barry White” persona and the “Kurtz” always post together and congratulate each other in exactly the same language,

            My inference is that these two personas are one and the same troll.

            Perhaps I’m wrong.

          • Barry White

            Of course, Peter G, you are wrong yet again. Poor Leo seems to be short and lending him one would be kind.

          • Peter G

            Give me one of yours, if you have any.

    • ART306

      Keep on topic you racist troll

      • Barry White

        Thank you, Leo. Can you look up the definition of Racist? You don`t seem to get it right.

        • ART306

          I get it okay, you best stop Greek/Greek Cypriot bashing, as you are becoming a bore. G/GC bashing is racist.

          • cyprus observer

            But it’s ok for you to Turk bash at every opportunity ?

          • Peter G

            No, it’s not OK, if it’s mere “Turk bash”[sic].

          • Leo

            Stop lying.

          • Barry White

            Leo, you must be proud to be Bash.

          • Barry White

            Welcome back Leo from hiding under your other names — the threat of banning for your racist troll comments must be up.

          • Leo

            Why do you think i need to hide, hide from what and from whom?

          • Barry White

            Why were you hiding, Leo?

            Come on out with it. Who has been a naughty boy and sent to the bad Trolls corner? Welcome back.

          • Leo

            “Why do you think i need to hide, hide from what and from whom?”

          • Barry White

            You tell us, Leo. You were very nearly a missing person.

          • Leo

            But, “Why do you think i need to hide, hide from what and from whom?”

      • cyprus observer

        The topic is correct…..he is lying. He knows the economy is tanking. Just a matter of time.

        • Peter G

          Sure. You wish.

        • Leo

          No one gives a sh!t.

  • cyprus observer

    « adding that Cypriot banks were adequately capitalised »
    Maybe cypriot style!

  • Jeremy Rigg

    I was under the impression that the Cyprus banks were bankrupt……….now where did I get that idea from?

    • Bob Ellis

      Common sense, something clearly lacking if your country touches the Med. As a friend put it ‘Most who are on teh med, should be on meds’

      • mongasz

        does RBS, Lloyds, northern rock ring a bell moron?

        • Bob Ellis

          Firstly, name calling actually takes any merit away from your comment. Secondly, you comment had no merit in the first place.

          • mongasz

            thirdly; avoid wasting time with morons – cheerio

          • Bob Ellis

            I try, but we so many about it is hard.

  • mazuate

    seems the coop bank still badly managed and making huge losses with 64% NPLs.
    EU stability mechanism will intervene – 2 billion is needed

    • Bob Ellis

      The IMF will not back any ESM hand outs now. The EU, ECB and ESM are skint with there barking mad logic putting the whole EU at risk. €1 trillion squandered with absolutely nothing to show for it. Apart from the EU gravy train still on the tracks and the rich/poor gap growing.

  • Kevin Ingham

    A bank’s capitalisation level is based on various suppositions about it’s NPL’s . The banks themselves will have determined their own projected recovery rates and the ECB has been somewhat lax in implementing rigid criteria for handling NPL’s across the Eurozone

    Even if you have high NPLs you can have adequate “capital levels” if there is adequate risk appetite for the debt (ie third parties wiling to buy the debt) and a legal framework for enforcing the debt.

    If these factors are lacking then you DO have a problem, and in this case that is ENTIRELY down to the government not creating a legal framework for the banks to pursue their NPL’s.

    How realistic the banks have been in working out what their real recovery rate will be is also extremely debatable

  • cyprusclive

    A wise man keeps little money in the Euro zone but goes to a barber for a haircut. In the euro zone the investor bails out the banks. Reckon next time they will steal from accounts over euro 70K.