09/09/2004 08:46
The business world of Cyprus has expressed its concerns on the publication of the Central Bank confidential circular on the exposures of the commercial banks. In the circular, the Central Bank urges banks to file legal actions against big debtors and guarantors or even take additional securities by the end of the year. Certain businessmen already feel the pressure, since banks are on the process of informing their customers on the new data.
Strict letter
The management of the commercial banks were alarmed by the strict letter sent by the Central Bank. The Central Bank Governor, who signed the circular, refers to a “sensible cash management” dropping hints on the way that the commercial banks handle certain accounts. “The banks must know how to cover these exposures. If not, they must take drastic measures”, sources said. On our contract with the Central Bank, the regulatory body stated that the circular falls within the framework of consolidation of the banks’ loan portfolios.
Good move, but…
Certain banks have already sent letters to the Central Bank asking for clarifications. “It is a move in the right direction. It will be good for the market if all banks follow the same procedures”, a source said.
On the other hand, the strict mood of the circular disappointed its addressees. Although the issue of circulars falls within the framework of the Central Bank’s supervision, bank circles emphasize that each case is special. Banks have complicated and multi-dimensional relations with their big debtors and they believe that a legal action does not serve the interests of their shareholders. Banks need more flexibility to handle each case separately.
Legal actions are time-consuming
Banks also insist that the procedures followed by the courts are time-consuming. “The issue of a court decision takes years”, while there are enormous delays by the land registry in the sale of properties. Many customers prefer the legal action due to the delays.
What about economy?
The simultaneous pressure to all “big debtors” and the strict timetables for their compliance with the circular will affect negatively the Cyprus market, business circles noted. So far, big debtors used to take advantage of the banks’ flexibility. Now they will have to give additional securities in a period of economic slowdown. “Customers will have no longer alternatives. We hope that the Central Bank will show flexibility when it will evaluate the progress from the enforcement of the circular”, bankers concluded.
Strict letter
The management of the commercial banks were alarmed by the strict letter sent by the Central Bank. The Central Bank Governor, who signed the circular, refers to a “sensible cash management” dropping hints on the way that the commercial banks handle certain accounts. “The banks must know how to cover these exposures. If not, they must take drastic measures”, sources said. On our contract with the Central Bank, the regulatory body stated that the circular falls within the framework of consolidation of the banks’ loan portfolios.
Good move, but…
Certain banks have already sent letters to the Central Bank asking for clarifications. “It is a move in the right direction. It will be good for the market if all banks follow the same procedures”, a source said.
On the other hand, the strict mood of the circular disappointed its addressees. Although the issue of circulars falls within the framework of the Central Bank’s supervision, bank circles emphasize that each case is special. Banks have complicated and multi-dimensional relations with their big debtors and they believe that a legal action does not serve the interests of their shareholders. Banks need more flexibility to handle each case separately.
Legal actions are time-consuming
Banks also insist that the procedures followed by the courts are time-consuming. “The issue of a court decision takes years”, while there are enormous delays by the land registry in the sale of properties. Many customers prefer the legal action due to the delays.
What about economy?
The simultaneous pressure to all “big debtors” and the strict timetables for their compliance with the circular will affect negatively the Cyprus market, business circles noted. So far, big debtors used to take advantage of the banks’ flexibility. Now they will have to give additional securities in a period of economic slowdown. “Customers will have no longer alternatives. We hope that the Central Bank will show flexibility when it will evaluate the progress from the enforcement of the circular”, bankers concluded.
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