Cypriot lenders urged to restructure loans

Cyprus Finance Minister Makis Keravnos has urged banks to restructure loans, maintain low lending rates and bank charges, and increase deposit rates in light of continued basic rate hikes by central banks. He warned that, otherwise, the government “would think differently of their intentions.”

In his first appearance to the Parliamentary Finance and Budgetary Committee on Monday, Keravnos said he raised the issue of rising interest rates in letters he sent to the governor of the Central Bank of Cyprus (CBC) as well as to the management of commercial banks.

“I have discussed this issue with the CBC governor and I had sent letters to the CBC governor and commercial banks and credit acquiring companies with clear suggestions over timely restructurings, reduction of lending rates and mainly to draft a list of strategic defaulters,” he said. He pointed out that not all borrowers can be dealt with in the same way.

Keravnos said he will hold meetings with the CEOs of Cypriot banks to discuss the issue. “Banks as large corporations have a social corporate responsibility to society and people who at the time of the crisis paid a great price to support the banking sector,” he said, referring to the financial crisis in 2013.

MPs expressed concerns that rising lending rates may lead to new nonperforming loans and voiced objections to the extremely low rates paid by banks to depositors.

“I agree that deposit rates are low, and we have pointed this out to banks. At least from our first communications, there will be a positive response. I hope that soon we will see results so we will not have to make other thoughts,” he said.

Keravnos also said the government could consider expanding the mandate of the Financial Ombudsman and increasing its staff.

However, he pointed out that continued suspension of foreclosures is no solution to NPLs “because it only inflates the problem,” while Cyprus is monitored by rating agencies and the European Commission. “This must stop,” he said, adding that new solutions should be considered.

With regard to a proposal over the establishment of a special court for nonperforming borrowers, Keravnos said he would absolutely agree with this, “provided that it would examine cases quickly and it would not take five or 10 years.”