By Staff Reporter
EUROPEAN bankers chided Cypriot banks yesterday for failing to pass on millions to small and medium sized businesses, which they called the “engines for growth and jobs”.
The president and vice president of the European Investment Bank (EIB) were in Nicosia yesterday to sign a loan deal with Cypriot banks worth €85 million to be used to finance small and medium businesses.
But the banks were told the EIB wanted to see the money filter down where it was supposed to go because right now, it was not reaching them. The deal, which is guaranteed by the government, provides for €50m to be given to Bank of Cyprus and €35m for Hellenic Bank.
“The SMEs urgently need the money and I encourage the banks not to waste time, to make sure that the money arrives at good projects of good small companies,” said EIB president Werner Hoyer after signing the deal.
EIB Vice president Mihai Tanasescu was straight up about the lack of access for SMEs. “The money is not going to the final beneficiary, and we are discussing among us, and we are discussing among you, what’s happened? Why is there this gap? What can we do?” he said.
Tanasescu said the EIB leadership had discussed the issue with Finance Minister Harris Georgiades who had told him there appeared to be a lack of demand for business loans. But Tanasescu said SMEs say they were being stymied by bank bureaucracy.
They say the banks are imposing harsh terms on loans, which they cannot under current circumstances meet, which puts them off borrowing.
The EIB official said he believed the truth lay somewhere in the middle.
“The truth is in between. Our role is to work together and encourage the banks to speed up this process. It’s a common effort to demonstrate that EIB together with you, will accelerate access to the final beneficiary,” he said. “I encourage the banks to speed up this process, because [while] our money is valuable for you, it is for the final beneficiary, I think, the most important issue.”
Hoyer struck a note of caution, saying that the banks could have been overly careful due to the upcoming EU stress tests or simply because a project was not convincing enough.
“We have complaints from companies… it could be that the bank might be a little bit reticent or too cautious in view of the upcoming asset quality review and stress test, it could also be that the project is not very convincing,” he said.
He urged both of the banks to make sure the EIB funds made available to Cyprus “will reach the final recipients”. “The idea is to enable small businesses to do their job. They are the real growth and job engine in Europe,” he said.
Bank of Cyprus CEO John Hourican who was also at the signing ceremony called on businesses to talk to the bank, because it was ready “to lend to you”.
“We recognise, as a banking sector, we have been slow, we have been licking our wounds and of course we have had much to repair. We must look forward, be ambitious,” Hourican said.
“My message to business is: come and talk to us. My message to government: please keep going. My message to our international, supranational partners is: we will work with you and hopefully we’ll be back signing more very shortly. And my message to the people of Cyprus is: we are making progress, we must keep going, and please, get behind your banks, get behind your economy, and start investing for the future.”
Hourican said the international community was watching. “They are watching a very successful recovery of Cyprus which we need to make sure we continue to achieve upon,” he said. “We must not interrupt the momentum.”
Hellenic CEO Marinos Yiannopoulos said that the bank intended to be an active player in the restructuring of the Cypriot economy.
“We believe that although the crisis is still prevalent, we can help new innovative businesses to be set up and existing businesses to become more competitive, thereby adding real value to the economy,” he said.
Yiannopoulos said Hellenic has ample liquidity, which it intended to channel into credit-worthy businesses and households. According to Yiannopoulos, the “Direct Line of Credit” lending package “will enables us to channel additional long-term liquidity from the EIB to Cypriot businesses, at attractive interest rates and favourable terms to the borrowers”.
Furthermore, he added, companies which actively seek to employ young people in their businesses will benefit from even lower interest rates and in this way, fresh funding will help enterprises play a significant role in the economy as key players of employment and income, and as drivers of growth. Additionally, he pointed out, some of these funds could be used for re-financing loans of economically viable corporations to help improve their financing conditions and strengthen their liquidity position and cash flows.
Georgiades, who signed the loan deals on behalf of the state, was aware of the problems being faced by the SMEs. “We have discussed specific ways with the EIB and the banks to speed up the pace of implementing these schemes,” he said.
The minister said granting government guarantees would increase the dispersal of funds to the real economy in sectors that were considered viable.
Hoyer said he had never seen as good signs of recovery as he was seeing now in Cyprus, adding however that “nobody should talk about the crisis being over”.
“We still need to do quite some miles together in order to say that the job is done,” he said.
“With today’s signatures, we address youth unemployment again, one of the major challenges Europe and Cyprus are currently facing,” he said.