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Loans in foreign currency: Their market share

13/07/2005 08:34
The borrowers’ turn to foreign currencies has changed things in the banking sector. The loans in foreign currency favour the commercial banks, which make the most of the advantage that they have against the Cooperatives to increase their market share in the £12.6 billion. The Cooperatives’ weakness to offer loans in foreign currency allows banks to increase their share in the market. Until last May, loans in foreign currency stood at £1.4 billion.

The Bank of Cyprus has granted loans of £458 million in foreign currency, which is 33.4% of the total £1.4 billion, the Popular Bank of £292 million (21.2%) and the Hellenic Bank of £152 million (11.1%).

The borrowing in euros seems to be an advantage for the smaller banks. Their share in the market is larger than their total share in credits. 18% (£248 million) of the Alpha Bank loans, for example, are in foreign currency, although its total share in the market hardly stands at 6.55%. Similarly, 3.6% of the loans granted by the Arab Bank are in foreign currency.

The 355 cooperatives, on the other hand, are at a disadvantage, since they are not actively involved in loans in foreign currency. Although their share in loans (in Cyprus pounds) stands at 33.1%, their share in total loans drops to 29.5%. “We are concerned about the situation but we have to take into account the exchange risk”, sources said. The House Financing Organization holds 4.5% of the loans in pounds but 3.9% of the total loans.

Despite its institutional weaknesses, Cooperatives are still the biggest creditors in Cyprus. By the end of May, they held 29.5% of the market, which is £3.7 of the £12.6 billion. The Bank of Cyprus held 24.4% or £3.2 billion, the Popular Bank 17.2% or £2.2 billion, the Hellenic Bank 9.8% or £1.2 billion and Alpha Bank 6.6% or £0.8 billion.