Banks in Cyprus have put operational strategies on ice due to the coronavirus, and parliament has followed suit by postponing debates on proposed legislation focusing on lender-borrower terms.
Debate before the relevant House committee on excessive bank charges is going on for over a year as lawmakers are trying to put the brakes on this practice. But the coronavirus epidemic has put on ice the Finance Ministry’s intention to issue a ceiling decree on bank charges.
Banks had counter-argued that fees on basic transactions was an incentive for clients to turn to digital banking. But the outbreak of the coronavirus and enforced lockdown in Cyprus has paved the way for many reluctant users of technology to go digital.
The announcement by banks that payment of utility bills can only be carried out electronically has led to a substantial drop of clients’ physical presence at branches.
However, banks whose operational strategies have been hit hard by the coronavirus have many more challenges to confront.
Sustaining the positive path they were on following a recorded slow but steady domestic economic is their major challenge now that coronavirus has turned everything upside down. The crisis will again affect herculean efforts towards decreasing non-performing loans in Cyprus.
Bank of Cyprus has already announced that due to the instability sparked by the coronavirus the sale of a package of non-performing loans, known as Helix 2, will now take longer than anticipated.
And that it is proceeding with €75 million additional recognized provisions to be included in the financial results of the fourth quarter of 2019.
Even the suspension of installments by households and businesses amidst the prevailing relaxed supervisory environment is a difficult equation for banks since revenue will become even more limited.
With the expiration of the suspension of installments at the end of 2020, banks are concerned over the day after even though they will have the option to restructure loans.
The country’s economy and commercial lenders go hand in hand and the effects of the pandemic could backfire plans to reduce red loans.
As expected, the coronavirus has also suspended foreclosures and sales by banks and asset management companies are now on hold for three months – up until June 18, 2020.
An extension for three months has also been approved of the obligation to submit necessary supporting documents by those who have already applied for participation in the Estia mortgage plan.
And all this while demand for big loans – for the purchase of homes and cars, for example – has dropped to zero, leaving banks with a limited range of operations.