Cyprus Property News logo
HomeProperty InvestmentBanks may need a further 1.5 billion Euros

Banks may need a further 1.5 billion Euros

CYPRIOT banks could need a further €1.5 billion of capital to cope with a rise in bad loans in a rapidly contracting economy, credit rating agency Moody’s Investors Service said on Thursday.

Moody’s said the Mediterranean island’s banks and cooperative lenders were likely to need the money on top of the €2.5 billion of EU support already earmarked for the banking sector.

Cyprus shut one its largest banks and forced depositors to forfeit savings to recapitalise a second bank in March, as part of a €10 billion aid package from international lenders after the country was hit by the euro zone debt crisis.

Moody’s, which put Cypriot banks on a “negative” outlook in May 2009, said in a report it anticipated a 12 per cent contraction in economic output this year, considerably worse than lenders’ estimates of an 8.7 per cent decline.

The agency estimated that problem loans increased to around 26 per cent of gross loans at the end of 2012, and would increase to over 35 per cent by the end of this year. It did, however, say there was limited publicly available data on the matter.

Reuters

6 COMMENTS

  1. This is no surprise…”there was limited publicly available data on the matter.”… in respect of problem loans – I venture to suggest that the fact is part of the problem.

    As Costas suggested I fear there are more revelations to come as no matter how thorough the troikan representatives were in their auditing procedures Cyprus and its elite have proven themselves to be masters of concealment and deception even in the face of corroborating evidence to the contrary. We shall wait and see.

  2. It is hard to say Costas, as Moodys have stated, there’s very little publicly available information.

    If it is anywhere near as bad as it seems, perhaps all the Cyprus Banks would have to be wound up. In such circumstances, the Government could not honour the 100K Euro Depositor guarantee under the FCS.

    A receiver, however would sell all the banks’ assets, and in time reimburse depositors as far as possible. In the IOM the receiver of KSF realised over 95% of all depositors funds and reimbursed the treasury’s 50K Stg. FCS.

    The Cyprus banks’ assets may be a different kettle of fish. The government might well have to apply to the Troika for permission to use their financial assistance to fund the FCS.

    In time some FCS money would be recovered, depending on the quality of the loan book.

    A new bank would be required immediately.

    It would be a dreadful mess, but at least a fresh start rather than muddling along as things are.

  3. It’s all about NPL’s. To my knowledge the government still hasn’t said how they are going to tackle the problem and the knock-on affect this has on the issuing of title deeds. It’s all been said before. The government still has removed the immunity clause from the constitution. This alone speaks volumes about its new era of transparency and accountability. Everyone knows that the NPLs will rise as the troika tighten the screw. It is only going to get worse for Cyprus.

  4. Track down the assets and ill begotten gains of those who perpetrated the financial collapse. Freeze and sell off as required.
    Simple.

Comments are closed.

Sign up to receive our free Cyprus property newsletter

We guarantee that we do not spam and will not divulge your email address to any third party.

Read our privacy policy for more information.

Cyprus property transfer fees

Property capital gains tax (CGT) calculator

EUR - Euro Member Countries
GBP
1.1870
RUB
0.0124
CNY
0.1351
CHF
0.9375

Top Stories

EC confirms response on golden passports

The European Commission has received a response from Cypriot authorities regarding the island's now- defunct 'golden passports' scheme, and will continue dialoguing with Nicosia,...

Inspecting resale properties – part 1

Given the long-standing issues with Title Deeds, more home buyers are restricting their search to resale properties that have been issued with their all-important...

Property values continuing to ebb and flow

WiRE FS has published its Q3 2021 edition of the WiRE Index for property and rental values. The WiRE Index covers all districts and...