Insider Business Cyprus banks asking for clarifications from Central Bank

Cyprus banks asking for clarifications from Central Bank

Banks are asking clarifications from the Central Bank of Cyprus following the supervisory authority’s call for additional liquidity to the economy to be granted. And for lenders to accept suspension of instalments as well as reduce interest rates and charges on new facilities.

Insiders told Phileleftheros that working groups of banks have begun recording clarifications and questions to be sent to the Central Bank.

And that their wish is for these clarifications to be taken into account and incorporated in the final circular to be sent out by the Central Bank whose board of directors is set to meet on Friday.

Insiders also said that after the announcement of the measures by the Central Bank, the number of business people and households asking for clarifications on how they get to benefit was high.

At the same time, Bank representatives believe that once clarifications and measures are in place, thousands of applications by clients will be submitted simultaneously. And this will lead to a large volume of work at a time when banks and related public services are understaffed.

A big headache for banks is how to handle loan restructuring without increasing at the same time non-performing ones or the need for additional provisions. This is something not clarified in the original text of the Central Bank’s recommendations.

Insiders said banks do want to help the economy and support businesses and households but would also like to know the following:

  • How long will the release of €1.4 billion of capital, through relaxations by the ECB (€1.3 billion) and €100 million by the domestic supervisory authority, last?

They want clarifications as to when they will be entitled to use the capital release and when this process will come to an end.

  • Also, what about loan restructuring measures that may include a suspension of capital or interest or both for a period of nine months? Banks want clarification on when the 9-month period will begin – that us, from the day an application is submitted or after agreement with the customer?

Another key point behind the success of this measure is the freezing of instalments for nine months (capital or interest or both) so as to be ‘orderly’. That is, if there is no default interest payment for the delay in the payment of interest or capital. And of course if the restructured loan is included in the list of non-performing loans.

  • The Central Bank noted that restructuring is for consistent borrowers, who will have to apply for restructuring by June 30, 2020. Banks would like to have a clear definition on who should be considered as a consistent borrower. Also, whether those with serviced loans which have already been restructured can also be included.

They are also asking for clarification on how to handle new non-performing loans that may arise from loans they restructured as a result of the country’s prevailing crisis.

  • Another element is the clarification of short-term borrowing. That is to say precisely the time period and precisely explain the terms of the contract for the payment of interest and capital at the end of the loan.

By Theano Theiopoulou


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