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Hourican: NPL recovery stymied by ‘poor’ legal system

Bank of Cyprus Chief Executive John Hourican

BANK of Cyprus’ CEO John Hourican said yesterday the legal framework the bank was forced to work within to recover non-performing loans (NPLs) was inadequate.

Hourican, who was addressing a conference in Nicosia on the future of asset management in Cyprus and Greece, said BoC was being more aggressive in pursuing `high end` borrowers but more compassionate when it came to `lower end` borrowers.

But he strongly stressed the need to amend current legislation so that the bank could better recoup its NPLs.

BoC was pursuing all of its non-performing loans “with the decree of vigour” allowed under the circumstances, he said.

“It is the case that we are having to work one by one in the confines of the legal system of Cyprus, which is very poor,” said Hourican.

“We do want and we do need a change in the law to help us improve the position on NPLs, and that is not to say that we are not placing ourselves as close to the law and doing everything we can on every individual in trying to recover those loans,” he added.

Hourican said the bank was being “compassionate” towards the lower end of its lending space and was being aggressive at the “higher ends”.

“If we find a viable business we would like to see that viable business can survive and we make any restructuring to ensure that people stay employed,” he said. On the other hand he added: “If we find a non-viable business we proceed to execute collateral that covers our loans”.

Hourican dismissed the notion that “nothing is happening”.

He said there had been results. “If you see the statistics overall you will see that the non-performing loans are stabilised and it is our intention to continue to try and drive an improvement in that position,” he said.

He said there were “a lot of things that have to come right in order the bank to generate capital, generate returns to investors”.

He also spoke of the need “to have confidence in the system as a whole”. Banking, he pointed out, “is about confidence”. “Cyprus needs to return to having confidence in its banking system,” Hourican said.

At the same time he reiterated that BoC was “making good progress”. “We have a clear repatriation of overseas capital agenda going on. The bank is delivering, the bank is making progress,” Hourcian said. “We are announcing each step of that progress as we go. What I need everyone in Cyprus to do, is to begin to give us some wind to our sails to ensure that we can continue to make that progress”.

Following the March 2013 bailout non-performing loans soared reached €26 billion. Debt restructuring is considered by Cyprus` lenders as an important element in the success of the island`s financial adjustment programme.

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