Banks in Cyprus are reviewing four specific support measures to help businesses counter the coronavirus effect with the condition that their capital is sustained.
Four proposals were discussed between bankers and Central Bank of Cyprus Governor Constantinos Herodotou during a teleconference on Sunday.
The Governor is expected to table additional measures for approval during a Central Bank board meeting on Wednesday. And also table some measures before the Single Supervisory Mechanism (SSM) for approval.
The specific measures under review are additional to those for which €1.3 billion of capital has been released so that Cypriot banks can support affected businesses and households.
The question is whether the European supervisor will show enough flexibility to proposals put forward by the Central Bank. Any relaxation will not only concern Cypriot banks but the Eurozone as a whole at a time when economies are tested.
On the other hand, it is also up to the banks themselves to announce support measures even if they don’t have the relaxation confirmation by supervisory authorities. That is, banks have to take the risk and deal themselves with any damages.
The support banks can provide to businesses without the European supervisor’s approval is the following: small short-term loans to meet immediate liquidity needs and raise overdrafts of businesses.
The difficulty is with restructuring of a loan so that the business becomes able to get certain facilities but the loan is then classified as non-performing.
This is where the flexibility of the Single Supervisory Mechanism is needed. At this stage, banks are not considering suspension of instalment payments as an autonomous solution.
They simply include this measure as an alternative solution within a loan restructuring package and as a short-term convenience to clients.
A fourth option is to provide a new loan that will repay the old one and bring the new repayment terms closer to today’s state of play. It could have a longer loan repayment period and possibly a more favourable interest rate.
The Hellenic Association of Banks in Greece has announced that its member are providing business support measures which include suspension of installments due from Wednesday and up until September 30, 2020.
This facility relates to those businesses belonging to sectors directly affected by the current crisis.
At the same time, bank administrations are also concerned that the economic crisis will also affect the real estate sector. And what they want to avoid is selling mortgaged property under pressure.
By Theano Theiopoulou