Finance Minister Makis Keravnos on Monday said he has issued ‘strong advice’ to commercial banks to focus on loan restructuring for distressed borrowers, as well as to increase deposit rates and contain lending rates amid a high interest-rate environment set to further squeeze consumers.
Keravnos made the remarks during his first appearance at the House finance committee. Outside the parliament building, meanwhile, demonstrators demanded an end to home foreclosures.
The economy czar expressed the hope that tweaking bank rates can be achieved “soon,” adding that he has raised the issue with both the governor of the Central Bank and commercial banks.
“I have discussed it with the governor, and as the finance ministry we have made clear suggestions,” Keravnos stated.
He said meetings will be held with all the banks, stating that these large institutions have a corporate social responsibility – particularly towards society which at the time of the 2013 financial crisis paid a heavy price for supporting the banking sector.
The Cyprus Mail reported over the weekend that rates on deposits are set to increase, but this may still take a while.
Keravnos said he has conveyed to lenders that they should implement the Central Bank guidelines relating to loan restructurings – which stipulate that banks must exhaust all avenues before resorting to property repossessions.
Unless banks heed his “strong advice,” the ministry is considering legislating the issue.
The finance minister additionally telegraphed that the government would beef up the powers of the financial ombudsman.
But Keravnos also clarified that imposing a freeze on repossessions, as had been done in the past, was not the way forward. Rather, banks should seek other solutions, such as figuring out how to deal with strategic defaulters and prioritising the restructuring of bad loans.
He has also asked banks to rein in lending rates and raise deposit rates.
Whereas the ministry cannot dictate to banks their policy, Keravnos said, at the same time the government “cannot sit idly by” for an issue that affects a large cross-section of people and businesses.
As a first step, Kedipes – the successor entity managing the assets of the now-defunct cooperative bank – has already announced subsidies on lending rates for loans under restructuring.
The minister further urged lawmakers to hurry up and pass amending legislation relating to the levying of discounted VAT on the purchase of the first home. Discussion of the bill in committee has been ongoing for several months, as Cyprus faces possible infringement proceedings from the European Commission.
In statements of their own later, some opposition MPs expressed disappointment at the new government’s approach.
Akel’s Aristos Damianou said that on the big issues of the day – high prices of goods, foreclosures and lower VAT on home purchases – the finance ministry could not deliver clear answers.
The Dipa party meantime called for a 100 per cent subsidy for the installation of solar panels for vulnerable groups, and 50 per cent for all others.
Greens MP Stavros Papadouris claimed that in no other EU country do repossessions proceed without a court first having set the statutory debt amount. That only happens in Cyprus, he said.
While the committee was in session, demonstrators outside called for a halt to property foreclosures.
The protesters, belonging to the ‘A Right to a Home Movement‘, held up placards reading: “Hands off our homes, they are sacred” and “No to the impunity of banks.”
Lefteris Georgiou, head of the movement known as EnErgo, told media that their demo would be the first in a series of escalatory actions.
He said next week they intended to block the roundabout at Germasoyia, Limassol for two hours.
“And if we need to, we’ll take measures that will be even worse for some.”
The group demand a freeze on home foreclosures and a re-examination of all files pertaining to repossessions underway.