By Stelios Orphanides
The Cyprus Cooperative Bank’s chief executive Nicholas Hadjiyiannis said on Monday it is time for Cypriot society to realise banks must tackle strategic default, echoing comments made by his Bank of Cyprus colleague on Sunday.
Hadjiyiannis said in a telephone interview that while banks cannot ignore the sentiment in society against foreclosures “what strategic defaulters do is at the expense of the society and public opinion will have to acknowledge that”.
Obligations assumed by debtors “are there and cannot simply disappear” and as a result, consensual solutions are necessary, he added.
In an interview with the Cyprus News Agency on Sunday, Bank of Cyprus Chief Executive John Hourican said he was getting “annoyed and impatient” with strategic defaulters – borrowers with the capacity to repay their debts opting not to do so – and appealed to society not to tolerate these actions.
Indicative of the current sentiment in the economy, four years after depositors at Bank of Cyprus and Cyprus Popular Bank – widely known as Laiki – lost money as a result of large portions of their loan portfolios not being serviced, there were demonstrations against and political opposition to government-owned Cyprus Cooperative Bank’s agreement with Spain’s non-performing loans specialist Altamira in early August. .
In addition, Hellenic Bank’s intention on September 7, to auction the foreclosed house of a strategic defaulter attracted a small crowd of protestors, including representatives of opposition parties, the Movement against Foreclosures and the neo-Nazi group Elam.
Hadjiyiannis said that while he could not quantify the percentage of strategic defaulters in the bank’s customer base, “finding solutions is definitely a difficult process as time is not a factor”.
Strategic defaulters, he added, do not feel that there is pressure as they do not feel that time is pressing.
In reality, “however there is no time left,” he said.
Banks, which since the 2013 crisis have been investing in infrastructure and know-how on to deal with an increasing stock of non-performing loans and a non-payment culture among some customers, now also need to create a “suitable atmosphere” to more effectively deal with strategic defaulters, Hadjiyiannis said.
The Co-op, which received in the form of capital injections in 2014 and 2015 almost €1.7 billion in taxpayers’ money, is struggling with a €7.2bn non-performing loan mountain, accounting for six-tenths of its loan portfolio as of June 2017.
Economic growth in Cyprus, forecast to reach 3.6 per cent this year, has not yet led to an increase in loan repayments, he said adding that the bank, therefore, aims to increase its operational capacity with the deal with Altamira so that it can “process larger volumes”.