He expressed the opinion that “we will see some movements” on the part of the banks regarding the level of deposit rates
The violation of the Code of Conduct of the Central Bank of Cyprus (CBC) by financial institutions is detected when the CBC conducts an audit, emphasized the Governor of the Central Bank of Cyprus Constantinos Herodotou, after a meeting at his offices AKEL with the General Secretary of the party Stefanos Stefanou.
At the same time, Mr. Herodotou expressed the opinion that “we will see some movements” on the part of the banks in terms of the amount of deposit interest rates, while in relation to the amount of interest charged on these loans by credit acquisition companies, he said that this is done “on the basis of the loan agreement that already exists”. The General Secretary of AKEL called on the Government to submit proposals to deal with the problem of sales so that, as he said, homeless people are not created and a huge social problem is exacerbated by the increase in lending rates.
“Targeted measures for the vulnerable and to maintain social cohesion is something that every state must look at”
In statements after the meeting, during which developments in the international banking sector, the problem of NPLs, the issue of divestments and the increase in lending rates were discussed, among other things, Mr. Stefanou said in relation to the issue of divestments, that the AKEL expects the Government to implement what it said that “very soon it will come to the Parliament with specific policies, programs and proposals with the aim of helping to protect the first residence and the small business premises”.
He said that the time limits set by the same Government are running out and “we still haven't seen anything” and added that AKEL will exert pressure both inside and outside Parliament “because the sales are continuing and there are many”.
Mr. Stefanou said that social policies and programs are the responsibility of the Government and added that “the Government should come up with proposals so that we can see how we deal with the problem of sales in such a way that we do not create homeless people and a huge social problem and it becomes more pressing due to the increase in lending rates which, in connection with the fixed incomes of households and small and medium enterprises, exacerbates the problem”.
The General Secretary of AKEL said that there are also proposals that are in the drawer of the Government which received them from the previous Government, adding that “with the CBC we have been discussing for a long time about a mechanism that calculates the balance of each borrower so that it is not in the absolute jurisdiction of the banks to decide on the balance of each borrower's loan”.
Regarding the increase in lending rates, Mr. Stefanou said that this issue comes from the Eurosystem with the aim of dealing with inflation and added that on this issue “we can have opinions but we cannot do anything”.
He stated, however, that “we do not see deposit rates following the increase in lending rates”.
Regarding international financial developments, Mr. Stefanou said that “we are interested in having Cyprus a strong and healthy financial sector that finances the economy” and “serves the public interest with sound practices”.
He also said that they also discussed general issues and proposals of the Central Bank and added that AKEL is in contact with the Central Bank in order to have “the right information and all the data” to be able to discuss rationally and make responsible decisions when the issues end up in the Parliament, “always with the public interest, the economy and society as a compass”.
For his part, Mr. Herodotou said that they discussed “international developments in the banking sector and the healthy state of the Cypriot banking system” and added that “the liquidity and capital of Cypriot banks are very satisfactory”.
< p>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”.
The Governor of KTK also said that he informed the General Secretary of AKEL about efforts he has been making “for some time” with private meetings with some banks on deposit rates with the culmination of these efforts when he called the executive directors of all the banks, to whom he asked and this issue.
He also mentioned that with the General Secretary of AKEL they exchanged opinions and how to deal with other issues that plague our society and that he also informed about specific ideas, proposals and actions of the CBC in what they ” they aim and with what timetable”.
When asked if he has found non-compliance with the Code of Conduct of the CBC, Mr. Herodotou said that “we find this when we do an inspection, unfortunately”, adding that “this is why we do the inspections and for this depending on how important some violations are and if they are systemic in an institution, the higher the penalties we impose”.
Asked to say whether the banks should immediately move to increase deposit rates, Mr. Irodotou said that for two months he has been advising the banks on this issue and expressed the opinion that “we will see some moves regarding the interest rates on the world's deposits”.
Regarding the level of lending rates, Mr. Herodotou said that we would all like to have less cost in loans, adding that this matter is about “what they allow us European laws and the Eurosystem”.
For this matter, as he said, “it may be more feasible to take some social support measures for the vulnerable groups of society”.
The Governor of the CBC also said that in his speeches he mentioned “many times that targeted measures for the vulnerable and to maintain social cohesion is something that every state should look at”.
Asked to say if there is another alternative in the event that an institution does not proceed with restructuring a loan, Mr Herodotou said that he had called on banks since the pandemic period to carry out “quick and immediate restructurings and the data and the results show that they followed through,” and added that “we've had a significant increase in restructurings.” medicine to reduce inflation – it is in the interest of the banks that these restructurings take place,” he said, adding that “it is not in any bank's interest for a loan to end up non-performing.”
Stating that the CBC controls the implementation of the Code of Conduct, Mr. Herodotou said that “if there was a proper and true attempt at restructuring, (this) falls within the framework of the controls we do”.
In his intervention, the General Secretary of AKEL said that “it was our constant demand both inside and outside the Parliament, that the banks comply with the Code and emphasize sustainable restructurings”, adding that many times AKEL complained both in the past and recently that ” the banks are taking advantage of their dominant position which became even more dominant after the changes in the legislative framework for divestments in both 2014 and 2018″.
“Especially in 2018 which removed even basic rights from little that borrowers have compared to what banks have,” he added.
Mr. Stefanou said that AKEL asked “from the previous Government to restore some rights of the borrowers in relation to the legal possibility they have to protect their property”, but this was not done and he added that this is also what he is asking from the new Government .
“Because we do not see that the Government currently has this political will – the recent presence of the Ministry of Finance in Parliament did not give this message – we are proceeding with the discussion of the proposed laws that we had submitted for a few years in the Parliament to strengthen the legislative framework of the rights and the ability of the borrower to protect the first residence and the small business premises”, he added.
Asked by the Governor of the Central Bank whether credit buyout companies have the possibility to impose interest on the assets they have bought at a significant discount, Mr. Herodotou said that it is the obligation of these companies “to act within the code of conduct of the Central Bank”, while in relation to the amount of interest they charge on these loans, he said that this “is based on the loan agreement that already exists for that loan”, adding that the loan agreement that existed before the acquisition of a loan by the specific companies ” it determines what it can impose in terms of interest or interest rate”.
When asked to say where the matter stands regarding the formulation by foreign houses of a proposal to reduce the MEX in banks, Mr. Herodotou said that “the project is progressing ” and the first phase of analysis is now being completed”, adding that the approval of the Board of Directors of CBC is needed in order to proceed with the second phase of the project. .
Questioned in relation to the concerns that exist for some European banks and whether there is a possibility that the problem will become systemic and spread throughout Europe, Mr. Herodotou said that there is concern in the markets and “the our concern is that it does not develop into something 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 necessary”, concluded.