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Reckless banks lent millions

A report by the Cyprus Central Bank reveals how the island’s banks lent millions of Euros recklessly without having properly examined the borrowers’ ability to repay or the value of the loan collateral.

Reckless banks lent millions NON-PERFORMING loans (NPLs) at banks are a concern for the island’s economy with new Central Bank data revealing that bankers lent hundreds of millions without proper examination of customer data or sufficient collateral provided.

This has resulted in most of these loans being up to 100% non-serviceable with huge delays.

The loans of the 20 largest borrowers amount to billions with the biggest problem recorded in Bank of Cyprus (BoC), according to Central Bank data.

At the island’s biggest lender, BoC, the total of non-serviceable loans of the 20 largest debts amount to €3.08 billion, delays amount to 1.32 billion (42.8%) and collateral amounts to just €2.89 billion. Total lending to the 20 borrowers amounts to €3.98 billion.

At Hellenic Bank the total amount of loans is €698 million with €645m being non-serviceable and delays amounting to €263 million (40.7%). The collateral is at €1.01 billion.

At the Co-operative sector the biggest loan amounts to €20.26 million in relation to €478 million at the BoC and €96m at Hellenic Bank.

At Co-ops total of loans of the 20 debtors amount to €195.46m but almost all of it is non-serviceable with €191.14 million.

Readers' comments

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  • Augean Stables says:

    No risk warnings, no communications with further risk warnings when Cyprus adopted the Euro, no warnings of two foreign currency exchanges when making monthly payments. Check out the ‘four eye’ principle regarding the Central Bank and ask what internal measures concerning ‘risk’ were even thought about, let alone adopted by Banks and their Managers when deciding to embark on offering foreign currency loans to the public and how such lending could be properly justified to the Central Bank, if of course, it ever bothered to ask.

  • Bob Bate says:

    Oh’ What a tangled Web we weave with those we wish to deceive !

  • MartynG says:

    Why the Surprise? It’s been pretty obvious for years that this sloppy, look after ur mates unregulated, uncontrolled lending has been going on. It’s just the Central Bank has finally realised the Game is Up. How now are the main rogue players going to be ‘brought to Book’ without the entire Cyprus banking system collapsing? Keep only basic needs funds in these banks. The days of reckoning are now not very far off!

  • Jill says:

    Breathtaking innit? Only 20 borrowers owe BILLIONS? Surely someone in the banks must have noticed this going on? And why is the Troika not actually freezing the assets of these known ‘thieves’.

    Obviously the EU either have no teeth at all, or it’s just more of the same to them. They couldn’t care less about this country. Why should they? The non taxpaying, non-mortgage/loan paying Cypriots don’t give a poo if their island goes down the tubes as long as they can get away with their cheating.

  • Scruffy says:

    @ janner
    That is precisely why the Troika inserted in the MoU that there would be “No right of appeal” on any property foreclosed. Their reasoning was that the legal procrastination was why banks had previously taken on average 15yrs to repossess.

    Why can’t they set up a separate system dedicated to these property frauds? Because in this banana republic it was not illegal. Its all about getting the banks out of the mess they themselves caused. We are just so much collateral damage.

    I wish now I had stopped paying my mortgage, All logic pointed to doing just that. Being British, I suppose I hoped that morality would prevail. I fear I have been very wrong on that score.

  • Janner says:

    To all those saying that those who take out loans must pay them back. I agree with that principle. The difference in Cyprus is that at no point were many purchasers ever told that the property they thought they were buying was actually used as collateral for someone’s loan! And that because of this odd way of doing business the property actually belonged to someone else and you would probably never own it due to the various debt attached to the property. That changes everything! To make matters worse the bank providing the house loan knew about your property being used as collateral for the developer banking with the same bank providing the loan. Add to this a lawyer that failed to advise correctly and a government that doesn’t see this as fraud and you have a tangled mess of debt and court actions!

  • Denton Mackrell says:

    @Nigel. Thanks. OK, so it is definitely the Cyprus Alpha Bank we are talking about. Why, then, do we not see one jot of data about their NPLs?? We see all the hoo-haa about the hundreds of court cases about them in London, which involve NPLs, but no overall data. Perhaps their loans are running at 100% NPLs and they are too scared to let the public know!

  • @Curmudgen on 2014/09/14 at 9:40 pm – Some years ago I tried to arrange for a structural engineer to prepare a report on the house of some friends of mine who were selling up. A asked another friend if he knew of anyone who would be prepared to do the job. After a couple of weeks I called him to see if he’d had any success. He said he hadn’t and that one engineer he spoke with said “if I write a bad report about a house built by XYZ, I’ll never work in Cyprus again”.

    You might think he was being ‘spineless’, but it shows the power that some of the property developers are able to wield.

  • @Denton Mackrell on 2014/09/14 at 1:59 pm – It was Alpha Bank Cyprus Ltd (the clue’s in the link).

  • Curmudgen says:

    Headline – Reckless banks lent millions
    Result – Financial collapse
    Political solution – Bank requires bailing out by Joe public

    Wasn’t a well know developer in charge of BoC when all this was happening? Isn’t he still roaming free? For the life of me, I cannot understand the Cypriot nation. They are seemingly spineless, afraid that the likes of ‘you know who’. What are they afraid of? Do they think the henchmen (now called supporters and employees) of the perpetrator(s) will come knocking on doors, drag them out in the street and harm them? What a load of nannies. Weak to the core!

    Just let the bank go to the wall and just bail out Joe Public? Sod the bankers, let them join the ranks of the unemployed. S*d accountants who perpetrate falsehoods and bury audit trails with complex accounting practices.

    The best bank would survive.

    Grief, am I angry!

  • Denton Mackrell says:

    @Ian Cracknell and Nigel. Which Alpha Bank? The main Alpha Bank is in Greece. Their subsidiary Alpha Bank Cyprus is, they assert, a totally independent entity wholly constituted as a Cypriot company. Not sure how a subsidiary can be wholly independent but we’ll let that pass.

    Which Alpha Bank was it that is involved in all those hundreds of court cases in the UK and allegations of involvement in a scam against British mortgage holders who bought properties in Cyprus? Alpha Bank Cyprus may be a minnow compared to BoC and Hellenic but its NPL data has, as Ian Cracknell says, been strangely absent in the public domain. Yet, clearly they must have a significant NPL problem otherwise they would not be pursuing all those borrowers and would not have ended up being sued by hundreds of them in the UK High Court.

  • demetri on 2014/09/13 at 4:49 pm – The Central Bank of Cyprus is the competent authority for the supervision and licensing of banks.

    In exercising its supervisory role, the CBC is guided by the recommendations of the Basel Committee on Banking Supervision, the guidelines issued by the European Banking Authority (EBA), and the rules of the EU which promote the adoption of best practices and standards. In this connection, various directives, circulars and guidelines regarding prudential supervision are issued by the CBC to all banks operating in Cyprus.

    I have been advised that “the Central Bank carries out on site inspections at banks and in the context of these inspections it also checks banks’ compliance with its regulations.”

    FX Choke, cough, splutter!

  • @ian Cracknell on 2014/09/14 at 10:07 am – The Central Bank recently fined the Alpha Bank a massive €89,000 for failing to comply with sections 58(e), 61(1)(d), 62(6), 64(2) and 69(1)(b) and (d) of the Prevention and Suppression of Money Laundering Activities Laws of 2007to 2013 and paragraphs 51, 109 to 112, 143, 144, and 146 to 149 of the CBC Directive issued under Article 59 (4) of the said Law – Imposition of fine on Alpha Bank Cyprus Ltd.

  • Why is the Alpha Banks debts never mentioned, or are they too ashamed to reveal their incompetence!

  • Mike says:

    dimitri, a spot on observation. It is therefore not surprising that the hot air blown during claims that anyone who did ship out money with the benefit of insider information will be bought to book actually fizzled out within days and came to nothing. Presumably, one can only imagine, when it was discovered that audit trails exposed those very same individuals who were mouthing off and of course their friends.

  • Alan says:

    What a joke? Collateral amounts to??? Let’s be honest take 25% of the numbers given to get the current collateral. Then we may be closer to the real NPL issue at BOC.

    Trust Hellenic slightly more 50%. Coop just write it all off!!!

    Then do the numbers… Fire sale at the ready.. Let’s be honest get to the bottom of the pit, be honest and move on….

  • demetri says:

    what exactly was the role of the central bank of Cyprus throughout this reckless lending by banks on the island? they just sat idly by apparently, and prior to ‘haircut’ time hitting Cyprus they were all in the know and shipped out millions with the benefit of this insider info they were privy to…

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