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Cyprus Editorial: The fly in the ointment

25 April, 2014 | Posted By: Financial Mirror

The arrogance of some developers and the apathy of bankers seem to have no boundaries.
During a recent meeting of big developers, all those present were crowing about how they still had the banks eating out of their hands and giving them the red carpet treatment and how there was no way the banks will chase them for their non-performing loans. They seem to regard themselves as untouchable and indeed they have probably been encouraged in this view by the banks’ timidity in pursuing the NPLs.
It’s no wonder, then, that the Bank of Cyprus and the Co-op banks are in such dire straits. But will the Troika ever act to force the banks to go for repossession and liquidation? If they don’t, then by this time next year it will probably be Liquidity Crisis II for BoC. Is not a ‘fire sale’ clearance of liquidated unsold property stock preferable to failing to grasp the NPL nettle?
We’re pretty sure that the first major recovery action against one of the big developers will suddenly see a miraculous coughing up of unpaid bank debts by the other ‘poor’ developers. Those that won’t, or can’t, should go to the wall.
Secondly, the same developers at this meeting were also cock-a-hoop about their next mega project – Varosha’s return to the Republic by the Turks and a new-build bonanza in Famagusta when foreign buyers will come flooding in once again.
There are three flies in this ointment: (1) Varosha’s return is pure speculation and, even if it does happen, may still be some way off. (2) Who would be in a position to finance the developers for this? Certainly not the banks in the Republic in their foreseeable circumstances. It is unlikely that developers here would want to borrow from Turkish banks. And would foreign banks really be daft enough to fund a bunch of developers with such an appalling track record of incompetence, lack of integrity and NPLs? And (3) why on earth would any foreign buyers who for years have been confronted with all the horror stories on the Cyprus Property Scandal on the Internet, TV and newspapers ever give any new Cyprus prospect more than a second’s glance?
With the Registrar of Companies recently reporting that one in four construction firms in Cyprus are close to bankruptcy, it’s high time banks took action against the so-called ‘troubled’ developers who have locked up the land’s money supply simply because they are stubborn enough not to want to pay any of the money back.
Perhaps parliament should go ahead and name-and-shame all those who have enjoyed privileged loans from the banks, some of which were for personal use and vast amounts were written off, whereas small clients are forced to cough up cash they don’t have for a four- or five-digit amount that the banks was to recover.