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BoC and Hellenic banks expected to sell €4b worth of bad loans

Bank of Cyprus is expected to make the sale towards the end of February

The two biggest banks are expected to offload around €4 billion in non-performing loans (NPLs) in the coming months, central bank governor Constantinos Herodotou said on Monday.

Speaking before the House finance committee, Herodotou said Bank of Cyprus and Hellenic Bank were in the process of selling €4bn in NPLs. Bank of Cyprus is expected to do so towards the end of February, according to the governor, who did not yet know the dates for Hellenic’s transaction.

The sale will represent over 10 per cent of the lenders’ bad debts.

Total NPLs at the end of August last year hovered around €9.6bn or about 29 per cent of total loans.

Along with loan sales, banks will also benefited from the government debt relief scheme, Estia, which will also help homeowners who have their primary residences mortgaged.

Herodotou said the banks have received 5,638 applications for Estia, but only 1,150 were complete with all the necessary documentation. Ninety have been forwarded to the labour ministry for processing.

The applications to date represent some €1.7bn in bad loans backed by primary residencies.

The governor said it was too early to say how many will be approved, but at first glance the finance ministry expects about 10 per cent to be ruled unviable.

An effort will be made to include those in other state support programmes although none existed currently.

The Estia scheme was proposed in the wake of the 2013 financial meltdown to help people with non-performing loans retain ownership of their primary residence.

The plan would also contribute to the deleverage of Cypriot banks.

As part of the plan, borrowers would have their loan reduced by about 36 per cent of its value, with the taxpayer helping out and the bank taking a small hit.

 

 

 

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