02/09/2009 14:48
The government will proceed with the issue of special 3-year government bonds of €3 billion on the banks’ commitment that their lending rates will be reduced soon. According to Finance Minister, Charilaos Stavrakis, with the additional liquidity the lending rates might be lower than 1%. “This means a drop of 1% with the issue of bonds until the end of the year”, he said.
Speaking after a meeting with bank representatives, Mr. Stavrakis said that the specific bill will be submitted to Parliament by October 8 so that the banking system enjoys cheap liquidity by the end of the year.
So far, the government has submitted around €2.4 billion to banks to boost their liquidity but it intends to take them back on December 28.
The banks worried that this withdrawal would “spoil” the liquidity indices and asked persistently for the issue of middle-term bonds.
According to the Minister, the distribution of the sum to the banking system will depend on the solvency of each one of the banks, while the government’s commission will be of 0.5%.
The issue of governmental bonds will be based on a permit that will be secured by the EU. Then, the government will issue three-year governmental bonds of €3 billion, which will be allocated to the banks. The banks will grant the sum to the European Central Bank as a pledge for the absorbance of cheap liquidity. The banks and the Coops committed to give the bonds back to the state in three years.
The banks will pledge a sum that will minimize the risks to the benefit of the state”, the Minister explained.
As for the government’s intention to bind the banks in writing that they will reduce their rates, Mr. Stavrakis said that at the current stage the Finance Ministry is examining a formula that will accompany the draft law and will define that the banks will commit in writing that in order to secure part of the bonds they must pass through the benefit to the Cypriot borrower.
The draft law, however, does not include such commitment but only a general reference that the banks will use the money for the granting of housing and business loans (SMEs mostly).
OEB Chairman, Andreas Pittas welcomed the government’s decision and predicted that “the low rates will largely contribute to the economic recovery and will be a help for the businesses and the consumers.
Similarly, CCCI Chairman, Manthos Mavromatis said that the €3 billion is a significant sum that will boost economy and will spark a climate of optimism among the businessmen and the consumers.
Mr. Mavromatis urged the banks to reduce their rates.
Speaking after a meeting with bank representatives, Mr. Stavrakis said that the specific bill will be submitted to Parliament by October 8 so that the banking system enjoys cheap liquidity by the end of the year.
So far, the government has submitted around €2.4 billion to banks to boost their liquidity but it intends to take them back on December 28.
The banks worried that this withdrawal would “spoil” the liquidity indices and asked persistently for the issue of middle-term bonds.
According to the Minister, the distribution of the sum to the banking system will depend on the solvency of each one of the banks, while the government’s commission will be of 0.5%.
The issue of governmental bonds will be based on a permit that will be secured by the EU. Then, the government will issue three-year governmental bonds of €3 billion, which will be allocated to the banks. The banks will grant the sum to the European Central Bank as a pledge for the absorbance of cheap liquidity. The banks and the Coops committed to give the bonds back to the state in three years.
The banks will pledge a sum that will minimize the risks to the benefit of the state”, the Minister explained.
As for the government’s intention to bind the banks in writing that they will reduce their rates, Mr. Stavrakis said that at the current stage the Finance Ministry is examining a formula that will accompany the draft law and will define that the banks will commit in writing that in order to secure part of the bonds they must pass through the benefit to the Cypriot borrower.
The draft law, however, does not include such commitment but only a general reference that the banks will use the money for the granting of housing and business loans (SMEs mostly).
OEB Chairman, Andreas Pittas welcomed the government’s decision and predicted that “the low rates will largely contribute to the economic recovery and will be a help for the businesses and the consumers.
Similarly, CCCI Chairman, Manthos Mavromatis said that the €3 billion is a significant sum that will boost economy and will spark a climate of optimism among the businessmen and the consumers.
Mr. Mavromatis urged the banks to reduce their rates.
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