Upgrading of two Cypriot banks by Fitch rating agency on Friday is a “positive and important development” in the course of stabilising the economy, Finance Minister Harris Georgides said, adding that decisive steps must be taken to ease the problem of non-performing loans in the banking system.
Fitch upgraded Bank of Cyprus Long-term Issuer Default Ratings (IDR) to ‘CC’ from ‘RD’ and Hellenic Bank’s Long-term IDR to ‘CCC’ from ‘RD’ as well the two banks’ short-term IDR to C from RD, citing the lifting of domestic capital restrictions imposed after the €10 bln bailout by the Troika of international lenders (EC, ECB and the IMF) in March 2013.
“The decision by Fitch is an important and positive development, another step towards the course of stabilising the Cypriot economy and particularly the banking system,” Georgiades said on Sunday.
He added that all these moves should continue because the ultimate aim is to fully restore the international confidence to the Cypriot economy.
The upgrade, he noted, “is of vital importance, a decisive factor in our effort to revitalise economic activity which cannot come in an economy without prospects and confidence.”
Invited to comment on Fitch’s observation that NPLs is the main challenge facing the Cypriot banks, Georgiades said this “is a serious side effect, or a residue of the unsustainable credit expansion and the excessive indebtedness of the previous years, which has left an oversized problem today.”
He said this upgrade would “undoubtedly” assist Bank of Cyprus’ efforts to raise fresh capital. No one would trust neither an economy, nor invest in a bank that would be downgraded or would not enjoy confidence, the minister added.
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