Interest rates should be cut, says Central Bank

Interest rates should be cut, says Central Bank

Central Bank of Cyprus Governor Chrystalla Georghadji told MPs on Tuesday that the Bank`s Board of Directors has decided that interest rates should be cut.

Addressing the Ethics Parliamentary Committee Georghadji said that there will be a press release on the matter within the next fifteen days.

She also announced that the Central Bank will link each banks goals on loan restructuring with its capital needs. “It should be painful for them when they don`t go ahead with restructuring loans”, she said.

At the same time, according to the data presented to MPs, 25% of the total loans portfolio is not covered by collateral.

Specifically, €14.76 billion or 24.7% of total loans of €59.73 billion as of September 2014 is not covered by existing collateral.

According to the figures, performing loans of the order of €4.99 billion are not covered by collateral while from the total €29.19 billion of non performing loans €9.77 billion are without collateral.

The €29 billion of non performing loans constitute 48.8% of total loans.

Georghadji, noted however that provisions made by the banks come to €10.77 billion.

On their part MPs questioned whether the value of collateral represents actual value today and pressed to find out whether banks are going ahead with re-evaluations of properties used as collateral.

Both Georghadji and Minister of Finance Harris Georgiades pointed out that just because there is collateral, this does not mean that guarantors should be off the hook or that loans should be written off.