By George Psyllides
Banks will start lending after the Europe-wide stress tests, Central Bank (CBC) Governor Chrystalla Georghadji said on Tuesday, suggesting that the results were expected to be manageable.
Speaking before the House Ethics Committee, Georghadji said banks did not have a liquidity problem and have even deposited cash with the CBC at a negative interest rate.
The governor said she expected this liquidity to be channelled into the real economy after the stress tests.
“I am optimistic that the results will be manageable,” she said.
The tests, conducted by the European Banking Authority and aimed at measuring how well lenders can tackle various scenarios, include the Bank of Cyprus, Hellenic, the Co-ops, and the Russian Commercial Bank.
The results will be announced on Sunday.
The main problem faced by banks is the high level of non performing loans, which hover around 50 per cent.
Authorities are looking to tackle the matter through loan restructuring.
Georghadji said loans worth €2.2 billion, or 8.06 per cent of total NPLs, were restructured in the first half of the year. The restructures concern 9,328 borrowers and 11,961 accounts.
The governor reiterated that a number of borrowers did not service their loans even though they had money in a different bank or abroad.
Responding to an MP, Georghadgi said borrowers were not crooks, just greedy.
“Many were greedy,” she said.
The governor conceded that banks were also to blame for lending money without taking into account the borrower’s ability to repay.
However, this did not absolve borrowers, who should make sure they can service their loan even in difficult times.
“If the bank does not get its money back it will not be able to lend more,” she said.
MPs appeared dissatisfied with what they heard regarding loan restructuring.
“We are disappointed over the results so far and we expect the CBC to guide the banks to proceed with loan restructuring showing a human face and flexibility,” committee chairman Phidias Sarikas said.
Borrowers have complained that banks were pressuring them into mortgaging additional property to cover their loans and were inflexible in the conditions they set.
“It seems that banks pressure borrowers to secure more mortgages instead of exhausting all options,” DISY MP Andreas Kyprianou said. “This is unacceptable. Loan restructures must proceed rapidly.”
By George Psyllides