Georgiades says Cyprus determined to protect financial stability

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By Stelios Orphanides

Finance Minister Harris Georgiades said Thursday the government will do everything necessary to safeguard financial stability on the island.

“Improvement of the legislative framework is a basic aspect of this effort and the government is ready to present its proposals to political parties and the European Commission,” the minister said, speaking at a joint event of the European Investment Bank (EIB) and the Nicosia Chamber of Commerce and Industry.

Cyprus, which five years ago suffered the culmination of a twin banking and fiscal crunch resulting in the loss of €8bn in deposits, is currently struggling with a second crisis round after it rescued the Cooperative Bank but failed to reduce its non-performing loans stock.

The lender is currently in buyout negotiations with two groups of investors.

It follows the government initially pumping in €1.5bn in taxpayers’ money in the form of a capital injection in 2014, and another €175m the following year. In April it was forced to issue €2.4bn in bonds in favour of the bank and depositing €2.5bn to allay concerns that had led to a bank run.

“We know that the robustness and proper operation of the banking system is an important parameter,” the minister said, according to the emailed transcript of his speech. “There was progress in this sector. The supervisory and regulatory framework, the capital buffers, and corporate governance were strengthened”.

“But the effort has to continue by focusing on tackling non-performing loans so that our banking system will be able to support the real economy but also respond to supervisory pressure and operate effectively within the European banking union,” he added.

In its stability programme filed to the European Commission outlining its economic policy framework for 2018 to 2021, the government said it intends to apply a three-pronged strategy in reducing non-performing loans in the banking system, which currently stand at around €22bn, or almost half of total loans.

The government’s plan includes the establishment of a vehicle that will absorb mortgages and retail loans with a primary home as collateral, the sale of the Co-op, and the modernisation of the foreclosure and insolvency legislation in an attempt to clamp down on strategic default.

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About Author

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

  • Bystander

    Stability, he says. He looked pretty fresh and different, when he started his ministerial career.

  • Cydee

    So we have to wait for new legislation before being allowed to clamp-down on strategic defauters – and how many years will that take???

    • Roger Thecabinboy

      are any legislators “strategic defaulters”? – I think we should know…

      • Cydee

        Ah, thanks Roger. Yes we see now, it will take years and years…..

        • SuzieQ

          Longer than that.

  • Kevin Ingham

    Economic stability involves making Cyprus business friendly for legitimate investment and resolving a host of problematic issues such as title deeds, NPL’s, SGO’s, tax evasion, environmental issues, corruption issues and getting some sort of workable solution to the Cyprus problem – how many of those have you tackled Harris ? I reckon none