Insider Economy Banks in Cyprus under political, supervisory pressure

Banks in Cyprus under political, supervisory pressure

Banks are under political and supervisory pressure to adopt the four measures taken by the Central Bank of Cyprus aiming to mitigate the coronavirus-sparked economic shock on the island’s businesses.

Lenders seem to be keen to help out but keep asking for clarifications written down in a circular that has been already sent to the Central Bank.

At the same time, working groups of banks are also reviewing the government’s bill providing €2bn in loan guarantees. But again they are asking for clarifications and safeguards so as to overcome supervisory hurdles that may arise from the Single Supervisory Mechanism.

However, the SSM is loosening provisions for lending along with requirements from banks under its supervision.

After giving the green light to Eurozone systemic banks to use their capital cushions for a week, the SSM now encourages them to avoid setting up loan forecasts which are excessively high because this would put pressure on the flow of new loans.

The SSM has also announced that the Authorities will be flexible on red loans covered by government guarantees. It also noted that they will be very flexible when discussing strategies with banks aiming to reduce non-performing loans in view of the prevailing market conditions.
The Single Supervisory Authority’s position comes at a time when banks in Cyprus are concerned over forecasts and losses that their balance sheets may suffer.

On Monday, Central Bank Governor Constantinos Herodotou said in a statement to state television that “the (coronavirus) cost should be divided equally.”

And that the moment Cypriot banks see the Central Bank, European Central Bank and the Single Supervisory Mechanism as well as the state moving in one or another direction, they cannot stop from moving in that direction as well, they have to change speed.”

Herodotou also said that he is holding a meeting with bank representatives on Tuesday in the presence of Finance Minister Constantinos Petrides in a bid to convince them to implement the measures taken.

“There should be no delay in taking measures,” he also said.

At the same time, banks may have their concerns but they are also getting ready for the day after.  They hold meetings with clients to review their response, even at an operational level, as a result of the coronavirus.

They are also preparing for the inevitability that thousands of clients will rush to apply for loans either guaranteed by the government or under the bundle of measures announced by the Central Banks.

By Theano Theiopoulou

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