Insider Business Banks in Cyprus tested again, this time by coronavirus

Banks in Cyprus tested again, this time by coronavirus

The negative financial effects of the coronavirus have come at a very crucial time for Cyprus banks, Phileleftheros reports.

Banks are mandated to manage a difficult situation under great political and supervisory pressure, reminiscent of the 2013 crisis when the island’s banking system collapsed.

However, the variable now is completely different with the banking system recording excess liquidity of some €15 billion in contrast to 2013 when that was at zero level. And the repayment of ELA emergency liquidity, along with over €9 billion to the European Central Bank, was more than urgent.

Non-performing loans stood at €27.32 billion by end of 2014 and have gradually been reduced to €9.41 billion by the first nine months of 2019.

What is at stake now is not to create a new generation of red loans. Moreover, legislation providing a nine-month suspension of instalment payments and €2bn of loans with state guarantees as well as other measures approved by parliament are expected to lead to significant revenue losses by banks.

Reassurances to the opposite from the Single Supervisory Mechanism are not enough, according to insiders who are convinced the decisions taken by the government to counter the coronavirus’ financial consequences will affect the capital level of banks.

Total interest income reached €785 million in the first nine months of 2019, compared to €1 billion in 2018 and €745.16 million in the first nine months of 2018. With the suspension of interest and installments, banks are expected to lose significant real – not accounting – revenue which is significantly reduced each year due to lower interest rates, anyway.

In addition, the state will now guarantee 70% of each loan individually received by households, businesses and self-employed and the banks will bear the risk of 30%.

In other words, banks could lose a maximum of €600m if a client’s loan defaults. Bank profits are expected to be tested accordingly and with remaining funds being at stake.

The banking system’s Core Tier 1 capital ratio / Common Equity Tier 1 capital ratio was 14.9% at the end of 2017, 15.1% in 2018, and 16.6% in the first nine months of 2019.  Each bank has different indicators of capital.

By Theano Theiopoulou

Read more:

Cyprus in lockdown: All the new measures

Top Stories

91 new cases of COVID-19 on Monday

The Health Ministry announced 91 new COVID-19 cases on 26 October, out of 2,285 laboratory tests, taking confirmed infections to 3,636. The break-down of new...

Bottled water withdrawn from Cyprus market

The Health Ministry is informing consumers that within the framework of the officials tests conducted in the market, the Ministry’s health services have tested...

President: Attack against Macron insults European values

In a written statement, President Anastasiades said that this attack, against the French President from the leader of a country which is candidate for...

Finance Minister: No lockdown forseen in 2021 state budget

Minister of Finance Constantinos Petrides called on MPs to approve the 2021 state budget given the critical moments facing Cyprus due to the coronavirus...

Mitsotakis-Anastasiades have working lunch

Prime Minister Kyriakos Mitsotakis on Monday had a working lunch with Cyprus President Nicos Anastasiades. According to government sources, during the lunch they discussed Turkey's...

Taste

Squash soup

Ingredients: 1 kg pumpkin, cut into small cubes, approximately 5 cups 2 medium (400g) sweet potatoes, cut into cubes, approximately 2 ½ cups 1 chopped leek, only...

Mezedes

No visit to Cyprus is complete without enjoying the traditional meal of many small dishes known as ‘meze’. This large feast, which has been a...

Prawns with fried cheese, barley shaped pasta

Put the barley shaped pasta into a small pan with salted water, bring to a boil and when tender, drain. Peal the prawns leaving...

Salmon and shrimp sheftalies

Mix all ingredients for tabbouli in a bowl and keep to one side so flavours can combine. Prepare the sheftalies: wash and soak the casing...