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PIMCO delivers final report

The Central Bank of Cyprus has announced that the US investment consultancy firm PIMCO has delivered its final report on the due diligence review of the Cypriot financial sector.

PIMCO report on Cyprus financial sectorPIMCO, the US investment consultancy firm, has delivered its report on the due diligence review on the diagnostic test for the capital needs of financial institutions in Cyprus.

(PIMCO was commissioned to carry out a due diligence review of the Cypriot financial sector and determine the capital needs of the financial institutions as part of Cyprus’ application for financial assistance from the European Stability Mechanism).

However, the Central Bank of Cyprus said in a statement that “The results of the report will be made public when the Memorandum of Understanding is signed between the Republic of Cyprus and the international creditors.”

As President Christofias has stated that he will not sign the Memorandum, the public will have to wait until after the inauguration of the new president sometime in March (unless the contents of the report are leaked in the meantime).

The report will be examined by the Steering Committee, who will then take into account the mitigating circumstances that have been put forward by the banks.

The Steering Committee, which appointed PIMCO, comprises the European Commission, the European Central Bank, the European Stability Mechanism, the International Monetary Fund, the European Banking Authority, the Ministry of Finance, the Central Bank of Cyprus, and representatives of the supervision the cooperative societies.

The Cyprus Central Bank has not (yet) issued a statement, but unconfirmed reports say that the banks’ recapitalisation needs will reach €10 billion in the worst case scenario, while rumours suggest a baseline scenario of some €8.7 billion.

On Friday, Government Spokesman Stephanos Stephanou said that the recapitalization of Cyprus banks should be done according to the baseline scenario of PIMCO’s due diligence and not the worst case scenario.

Including the €7.5 billion required to support the government, the total bailout could amount to €16.2 billion (using the baseline scenario) or €17.5 billion in the worst case.

According to the draft Memorandum of Understanding: “The (Cyprus) banking sector has been severely affected by the broader European economic and sovereign crisis, in particular through its exposure to Greece. However, many of the problems for the sector are home-grown and relate to overexpansion in the property market as consequence of banks’ poor risk management practices.

Readers' comments

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  • Pavlos says:

    So if the bailout is agreed, what will change? What is needed to make Cyprus a sustainable economy? I would like the incoming politicians to answer my questions/:- where was €80B spent? what dis-incentives will stop this next time? how can Cyprus become an international competitor compared to Singapore?

    p.s. of the €80B (forget the Greek Government €5.2B (IMF 2011) or was it €8B) how much has not had interest paid in the last 90 days? the IMF and banks estimated 20% in 2011, it is 25% IN GREECE TODAY!!!!

    The Cyprus Central Bank in 2008 told banks “if you think you have capital cover then don’t declare”.

  • John Swift says:

    The banks deserve all that they get they saw the fiddle regarding title deeds as a sure fire investment in property.
    If the builder defaults they win, if the builder doesn’t default they win.

  • Steve says:

    Anyone who has agreed the purchase of an apartment or a house in an undivided estate from a developer is almost certain to be landed with immovable property tax, irrespective of the value of their individual property. The purchaser has to refund the tax to the developer to get the title deeds and then if the individual property now divided from the rest is not liable for immovable property tax, this can, in theory, be claimed back from the tax man. The longer you wait for the title deeds or the longer you postpone the transfer when they are available, the more you will pay.

  • Costas Apacket says:

    Kal, as others have pointed out, I think that a lot of Cypriots don’t choose to pay the Title Deed transfer tax for their houses because they are already the registered legal owners of the land on which they are built and, therefore, there is very little chance that anyone can take their immovable properties away from them unless they have a loan secured against their land title that they cannot repay or they become bankrupt.

    Maybe their view is, why should we pay transfer taxes and increased IPT when our assets are safe?

    Unfortunately most foreigners and a lot of Cypriots are not the registered legal owners of the land on which their houses are built and therefore if the registered owner of this land, usually the Developer, has loans secured against the land which they cannot repay then the lender can confiscate the secured land asset from the legally registered owner plus everything that exists on this land including the properties of the aforesaid foreigners and Cypriots, even though the foreigners and Cypriots may have paid the Developer in full for these properties.

    The main point I was making is that there are reportedly circa 130,000 outstanding immovable property Title Deeds in Cyprus which could net the Cypriot Government circa 1.3 billion Euros of tax revenue at this time of great need for the country, but for some unfathomable, opaque and hidden reasons they do nothing about collecting this revenue.

  • Denton Mackrell says:

    @Kal. Some (mainly native Cypriots) traditionally have not wanted to take their deeds when available, that is true. However, the picture with foreign buyers is the opposite for fairly obvious reasons i.e. until you have the deeds issued in your name you are still at the mercy of the developer (in the main) if he/she goes bust.

    For various reasons I happen to know personally getting on for 100 buyers who have been waiting for their deeds for up to 8 years – and they all desperately want them. I would guess that this is not unrepresentative of the rest.

  • Milo says:

    @Kal
    Of course its okay saying you don’t want Deeds for monetary reasons BUT if the person on those Deeds, notably Developers, suddenly are asked to cough up money they owe the banks pretty soon, their only collateral being your properties, then what do the banks do then? Sell your property, surely not…..

    Something expats have been banging on about for years may well rise to the top of this property mess. The banks won’t get loans repaid and they will become owners of property that has beneficial owners living in it. I’m sure the Troika are fully aware of what has been going on here, and will no doubt make every pay in some way, let’s hope though it’s mostly the banks and the developers.

    I’m positive as a property owner, anyone else’s name on my deeds other than my own would fill me with horror! It’s completely bonkers, and to anyone outside the country who own a property certainly not normal, and as many are finding out who own there without Deeds as safe as a chocolate fire guard.

  • Kal says:

    People keep mentioning the 130,000 outstanding Title Deeds. How many of those that do not have Title Deeds actually want them? Not many I bet!! The only time you need Title Deeds is when you want to sell and in the meantime you have to pay tax on your Title. A lot of people however do not want to pay the tax they should, unfortunately.

  • Costas Apacket says:

    Gloria – Nice name, how long did it take you to come up with that one Eric?

    At least you got my name right this time!

    Perhaps you don’t think the RoC needs 1.3 Billion Euros in revenue as it slides down the pan?

    Or perhaps you don’t really have an opinion on the subject, and only wish to insult those who point out the ridiculous and opaque nature of certain property related matters in Cyprus?

  • John Swift says:

    Completely agree with Cost Apackets post I’ve been saying for a long time that there is a huge amount of money (1.3 Billion euros) available that is lying dormant due to the title deed issue.

  • Adrian says:

    Obviously President Christofios does not want his “going away” outfit spattered when the report is made public and the s***e hits the fan.

    Everyone knows what the report will say it is just that the rest of Europe will now be aware of what a bunch of self serving and incompetent people are running (or ruining) what is otherwise a nice place to live.

  • Gloria Stits says:

    Costas…such a well balanced guy with a chip on both shoulders.
    Is it really neccessary to mention the Title Deed issues and the 130,000 so called victims every time you post your point of view.

    Gloria

  • Martyn says:

    1. In refusing to sign the MoU, Catasrofias simply ensures, for his own personal/political satisfaction it seems, that Cyprus’ agony will be further prolonged and that – somehow he cannot be blamed. This really is an Outrage.

    2. Draft MoU “However, many of the problems for the sector are home-grown and relate to overexpansion in the property market as consequence of banks’ poor risk management practices.”

    The ridiculous delays in signing this could well still lead to the much reported ‘worst case scenario’ being, ultimately, much worse than many forecasters/commentators suggest.

    It’s a good job Greece/Cyprus Easter falls very late this year, otherwise another, religious, reason for delay beyond March might be found.

    Never Mind, the gas is out there somewhere, they’ve just got to find a way of getting and using/selling it before the Cypriot economy collapses altogether!

  • Frank says:

    How childish that the man, who led Cyprus into its current and tragic situation, refuses to sign the Memorandum. When the going gets tough; Christofias will get going: leaving others to try to repair the effects of his presidency.

  • Costas Apacket says:

    Yet again, I’m really glad to see more proof of the fact that, as ‘don’t call me Shiarly’ recently put it, – “Cyprus has nothing to hide”.

    Everything is open and transparent in the Banana Republic except obviously the result of this study and many other things which Shiarly fails to acknowledge including the reasons why 130,000 Property Title Deeds worth circa €1.3 billion to the Cypriot Government in revenue income are still being denied to their rightful owners resulting in a lack of invaluable revenue which, if collected, may even make the RoC’s future debt sustainable.

    No wonder the Troika don’t trust them as far as they can throw them.

    Schisters the lot of ’em.

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