The Cyprus Borrowers Association (Syprodat) and Central Bank of Cyprus (CBC) governor Christodoulos Patsalides on Tuesday discussed the need for sustainable loan restructurings, as well as the issue of lending rates.
In a statement to the Cyprus News Agency (CNA), Syprodat president Costas Melas described the meeting as constructive.
He said that both sides agreed that loan restructuring solutions are practical and beneficial for banks, credit management companies, and borrowers.
Regarding interest rates, Melas said the governor highlighted his efforts to convince banks to reduce lending rates and narrow the gap between lending and deposit rates.
This was the first meeting between Syprodat and Patsalides since he assumed his position as governor.
Moreover, Melas stated that the key topics discussed were interest rates, the behaviour of banks and credit management companies in handling restructurings, and the implementation of the directive and code of conduct concerning vulnerable borrowers.
“We agreed that restructuring solutions are the most practical and benefit both sides,” Melas said.
Asked about the governor’s response to the issues raised, Melas remarked that the prevailing sentiment is that everyone wants to help borrowers, which is “very encouraging”.
Melas emphasised that there are tools available to achieve restructurings, referring to the directive and code of conduct issued by the Central Bank of Cyprus.
These tools were drafted during the economic crisis with the insistence of Cyprus’ group of international lenders referred to as the Troika.
“The directive includes four pages of examples and methods for banks to provide sustainable restructurings to borrowers,” Melas said.
“Foreclosures do not solve the issue of non-performing loans, as a loan with a value of 100 units through foreclosure yields only 50 units for the bank, and the remaining debt still burdens the borrower,” he added.
Regarding the behaviour of loan-buying and credit management companies, which now hold the bulk of non-performing loans after being transferred off banks’ balance sheets, Melas said the governor made it clear that any violations of the directive must be reported by either the association or borrowers themselves for investigation.
“That is why I said the governor’s approach and that of his team were very positive,” Melas stated.
Finally, on the topic of interest rates, Melas explained that Patsalides reiterated his efforts to convince banks to reduce lending rates.
