'Cyprus banking system ready to absorb shocks'

Kathimerini.com.cy

Tasos Yasemidis, an economist, spoke to "SPOR FM 95.0" and the "DIASPORA NEWS" show about the deal for the acquisition of Swiss bank Credit Suisse by UBS and how it affects the banking sector in Cyprus, stating that any negative consequence in the globalized economy we have is cause for concern, but Cypriot banks are adequately capitalized. At the same time, he emphasized the importance of exercising caution in order to avoid a financial derailment.

According to Yasemides, we can expect interest rates to stabilize and then fall in the second half of the year.

When asked if the current decline in international markets was unforeseeable after the acquisition, Mr. Yasemides clarified that the decline in financial markets appears to be under control, and what we basically expect to see is the next steps on how this merger will be completed. "It may have stabilized the Swiss financial sector and the global economy, but it creates losses for certain investors, and we will have to see how the plan to gradually merge the operations of the two institutions works because the sizes are so large." When asked if the Credit Suisse situation was related to the collapse of Silicon Valley Bank in the United States, Yasemidis explained that the former had been experiencing serious problems for two to three years as there were issues of credibility and scandals.

First, there will be stabilization, followed by interest rate cuts

When asked if there was a contradiction in the European Central Bank (ECB) announcing an interest rate hike and then talking about coordinated actions to improve liquidity access the next day, Yasemides said that the ECB confirmed its previous decision, which it does not intend to postpone or cancel. "There is a contradiction because raising interest rates takes liquidity out of the market," he added, referring to the Bank of England and the Bank of America's decisions this week, which may change their stance and result in no interest rate increase.  However, no further rate hikes are mentioned in the statement this time." He expects interest rates to stabilize and then fall in the second half of the year.

The banking system in Cyprus has been strengthened

Yasemides stated that the Cypriot banking system has been strengthened and adequately capitalized following the events of 2013, with good liquidity ratios, adhering to strict ECB guidelines, and is ready to absorb any shocks. According to Yasemides, there are two issues in Cyprus. To begin, if the economy slows, everyone in the Cypriot economy will have to assess the environment in which they operate. The second issue is that they must constantly monitor their loan and investment portfolios so that they can take corrective action as needed.