Governor of the Central Bank of Cyprus (CBC) Constantinos Herodotou said on Wednesday that there’s a concern in markets that problems with some European banks could evolve into something bigger. He added however that the European Central Bank (ECB) was reassuring about the health of the European banking system.
Asked about concerns for some European banks and whether the problem could spread throughout Europe, Herodotou said that there’s a concern in the markets and expressed hope that this concern of the markets does not grow bigger.
"The ECB confirms at the European level the good health of the European banking system and its readiness to intervene with liquidity or other measures if and when needed," added Herodotou, a member of the Governing Council of the ECB.
The Governor was replying to journalists’ questions after he met with AKEL party Secretary General Stephanos Stephanou in Nicosia, with whom he discussed the international developments in the banking sector and how it affects Cyprus. Herodotou assured Stephanou of the healthy state of the Cypriot banking system and added that "liquidity and capitals of Cypriot banks are very satisfactory".
“We also discussed the concerns we all have in relation to both inflation and interest rates”, he said and added that "lending rates are decisions of the Eurosystem and aim to limit inflation”.
Herodotou also said that he anticipated some increases in deposit rates from the banks, while in relation to the number of interest rates charged on loans by credit acquisition companies, he said that this is done "on the basis of the loan agreement that already exists.”
The Governor of CBC also said that he has been holding one-on-one meetings with some banks on deposit rates and he has also met with the CEOs of all Cyprus banks, to whom he also raised this issue.
Αsked if there are cases of non-compliance with the CBC's code of conduct for non-performing loans by the banks, the Governor said that "unfortunately we see this anywhere we do an audit,", adding that if the banks are systemic they impose higher penalties.
In relation to lending rates, Herodotou said that we would all like to have less cost in loans, adding however that this matter concerns what the European legislations and the Eurosystem allow to the member-states. For this matter, as he said, "it may be more feasible to take some social support measures for the vulnerable”.
Replying to a question on loan restructurings, the Governor said that he has called on the banks since the pandemic period to carry out quick and immediate restructurings. According to the data and results, he added, there was a significant increase in restructurings.
"Now, unfortunately, that our society and borrowers are under pressure by both inflation and rising interest rates - which is the necessary medicine to reduce inflation - it is in the best interest of the banks to proceed with these restructurings," he said.
Herodotou also said that a CBC project on a mechanism to reduce NPLs in all Cyprus banks was proceeding and soon the relevant analysis by international agencies would be completed. He added that ECB approval is needed for the project's second phase.