Cyprus government approves new measures to manage NPLs

Cyprus Finance Minister Makis Keravnos on Wednesday announced that the Cabinet of Ministers has approved another action within the Recovery and Resilience Plan, focusing on the framework and action plan for managing Non-Performing Loans (NPLs).

He emphasised that “the government will continue to support the Cypriot economy and society in a targeted and flexible manner, promoting the appropriate measures for the maximum utilisation of available European programmes and funds, especially in terms of financial support through the Recovery and Resilience Plan”.

Responding to questions about potential changes in bank interest rates or taxation of their profits due to rising interest rates, Keravnos stated that “the key issue is to narrow the gap between lending and deposit interest rates”.

“I have noticed some moves by banks through interventions by the Ministry of Finance and the government in recent hours, which I will discuss with them during the scheduled meeting,” Keravnos said.

“I hope and will insist that there will be a response to the objective I have already mentioned,” he added.

Moreover, Keravnos explained that the action of the Recovery and Resilience Plan approved today consists of two key parts.

The first part, he said, “concerns the obligation of the framework for managing NPLs, including aspects of loan management by credit acquiring companies and specialised management companies”, he said, noting that “this part has been fulfilled based on the legislation that has been passed”.

The second part, he explained, “concerns the preparation of a progress report to the Cabinet, which was submitted and approved today”.

“This report records the progress of NPLs in relation to indicative targets set within the framework of the Recovery and Resilience Plan,” the minister stated.

“These indicators relate to NPLs not exceeding 6 per cent and the net NPL ratio, excluding provisions, not exceeding 3 per cent,” Keravnos noted.

As he pointed out, both of these indicators have been met. The NPL ratio is currently at 5 per cent and the net NPL ratio at 2 per cent, which means that the Recovery and Resilience Plan is proceeding as planned, and the government “will leverage every opportunity available to it”.

In his statements, Keravnos also mentioned that “as already announced, the international credit rating agency Standard & Poor’s has confirmed the creditworthiness of the Republic of Cyprus at the investment grade of BBB and revised its outlook from stable to positive”.

“This refers to the fact that the new government seems to be able to maintain stable fiscal surpluses in the coming years and that significant progress has been made in the banking sector in reducing Non-Performing Loans,” Keravnos said.

Furthermore, he emphasised that “the agency highlights that the Cypriot economy is expected to record a growth rate of 2.6 per cent in 2023 and expects the medium-term economic growth rate of the Cypriot economy to hover just below 3 per cent”.

“This is also a reflection of our own estimates and projections, supported by further expansion of tourism and efforts to diversify the economy in the technology sector, as outlined in President Nicos Christodoulides’ pre-election programme and governance agenda,” he added.

When asked if the Standard & Poor’s report is a response to those who claim the economy is being managed well, the Finance Minister responded that “unfortunately, populism is prevalent in this country”.

“I believe that for matters that are in the national interest, such as our economy, we must be more serious and well-informed,” he added.

“We do not need to reconfirm that our economy is doing well; credit rating agencies confirm it, and I think that should be enough,” the minister concluded.