Cyprus Mail

Central Bank challenges ECB over NPLs

The Central Bank (CBC) has challenged the findings of the European Central Bank (ECB) regarding the status of restructured loans in Cyprus, the head of the borrowers’ association Costas Melas said on Wednesday.
He was speaking to reporters coming out of a meeting with CBC governor Chrystalla Georghadji, where they discussed the ECB’s April report concerning the level of non-performing loans in the Cypriot banking sector.
Melas said he was informed by Georghadji that the CBC has already made representations to the ECB to amend its findings.
The ECB had found the majority of restructured loans in Cyprus continued to be classified as non-performing.
But the ECB’s report was based on “inadequate data”, Melas was told by Georghadji.
The CBC’s own data showed by contrast that only 20 per cent of restructured loans are currently non-performing.
The CBC has since forwarded this data to the ECB so that the latter may take it into account in its next report, Melas said.
In its report dated April 7, the ECB warned that “efforts to restructure non-performing exposures have not yet shown tangible results.”
Although financial institutions have stepped up their debt restructuring efforts, the results have been mixed so far, the report said, adding that the share of restructured loans increased during 2015.
“However, the ratio of non-performing restructured loans to total loans increased as well, suggesting that many restructuring operations are not sustainable and are non-performing” the report said.
In absolute terms, the rise in restructured loans was almost fully matched by that of non-performing restructured loans.
By September 2015, the restructured loans to companies stood at 24.6 per cent, while performing loans were at 6.8 per cent of the total loans.
In the same month, non performing loans to households were at 17.5 per cent and restructured loans at 7.7 per cent.
In addition, the ECB stressed that the enhanced restructuring efforts were still falling short of the restructuring targets set in agreement with the CBC.
Also on Wednesday the borrowers’ association submitted to the CBC a memo calling for stricter implementation of the CBC’s code of conduct which grants borrowers an extension of repayment period for people affected by the financial and economic crisis.
Despite the code of conduct, as last amended in 2015, Melas said commercial banks continue to impose arbitrary charges on overdue payments as well as unilateral increases in interest rates not provided in loan agreements.

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