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Cyprus Banks Association discusses with Troika non - performing loans definition

06 February, 2014

The Association of Cyprus Banks discussed with Troika technocrats its concerns over the new classification of non - performing loans and the impact this may have on the financial results of banks.

Senior Officer of the Association Michalis Kronides told CNA that the discussion revolved around the latest guidelines issued by the Central Bank of Cyprus (CBC), as the Directive on the Definitions of Non-Performing and Restructured Credit Facilities and the Directive on Loan Origination Processes and Processes of Reviewing Existing Loans
During the meeting with Troika technocrats, the Association expressed concerns regarding certain provisions of the Directives.

According to the CBC Directive of July 2013, a loan that is not performed for more than 90 days, is registered as non-performing, a definition to which the Banking Association agrees, as it is part of the international practice.
However, the Association expresses concern for the classification of a restructured loan as non-performing, when at the time of restructuring presented excesses for a period of more than 60 days, even if after the restructuring is paid regularly.

At the same time, the Association expresses concern about the directive classifying a loan as non performing, if it has been restructured more than once in an eighteen month period, even if it was paid properly.
"As a result the non-performing loans levels of the Bank are inflated, with an impact on the projected results, the possible new capital needs, profitability, etc.," said Kronides.

The Association also expressed concerns as to the stricter procedures for granting new loans. While the Association believes that the new guidelines are in the right direction, it points out that it should be given some time to bank customers to familiarize with the new process.
The Association also raised the need to lift the capital controls as soon as possible in order to boost confidence in the banking system and the economy.

The Cypriot authorities and the Troika (EC, ECB and the IMF) agreed last March on a €10 billion bailout, featuring haircut of uninsured deposits. A Troika delegation visits the island for a third review of Cyprus’ programme.