Finance Minister Makis Keravnos on Tuesday called on banks to reduce interest rates and avoid further hikes.
In a speech at the annual general meeting of the Association of Banks, the Minister urged two key actions: First, he called for a reduction in the spread between deposit and lending rates, and second, he emphasised the need to avoid further interest rate hikes, advocating for a meaningful path of lending rate de-escalation following the recent marginal cut by the European Central Bank.
“I want to convey to our banks, in the most emphatic way, the cries of anguish from our households, our businesses, and the common denominator of political perception regarding the level of lending rates, which is one of the most serious inhibitory factors in economic development and addressing social problems such as housing,” he said.
He also called on banks, credit purchasing companies, and credit management firms to continue their efforts in reducing non-performing loans, benefiting all stakeholders and boosting economic growth.
Central Bank Governor
Christodoulos Patsalides, the Governor of the Central Bank, said in his own speech that the economy and banking system would continue to demonstrate resilience and adaptability to changing global economic and geopolitical turmoil.
However, he also acknowledged some concerns, including the potential impact of rising interest rates on asset quality and the need for vigilance. He emphasised the importance of timely identification of customers facing financial difficulties to find viable repayment plans.
From the banks’ perspective, The Central Banker noted, “it is of utmost importance to timely identify customers facing financial difficulties and work towards finding a viable repayment plan. This limits costs for both banks and borrowers while avoiding the implementation of more drastic measures.”
Banks’ representatives
Panicos Nicolaou, the outgoing President of the Association of Banks, stated, “Cypriot banks have played a significant role in supporting consistent borrowers facing inflationary pressures and interest rate hikes by the European Central Bank. Restructurings and renegotiations of loan terms for a large number of households and businesses amounted to €4.5 billion between 2022 and 2023, and this process continues.”
The General Manager of the Association of Banks, Michalis Kammas, said in his speech: “Even though uncertainty always looms, and forecasts may not be so optimistic for the near future, we must focus on the positives with realism and build better conditions for future generations. The positive elements we have before us regarding banks include their strong capital base, high liquidity, and a significantly reduced volume of NPLs in their portfolios compared to just a few years ago.”
House Speaker
The Speaker of the House of Representatives, Annita Demetriou, emphasised the impact of high interest rates on households and businesses, particularly in the context of rising production costs and compressed disposable incomes.
She stressed the importance of considering additional solutions to support creditworthy borrowers and prevent a new wave of non-performing loans.
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