FINANCE: Cyprus banking system is shrinking

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For the first time, Cyprus bank assets have dropped under 60 bln, mainly due to the closure of the Co-op as some assets not transferred in the Hellenic takeover.


Total banking assets fell to 59.4 bln in September compared with 65.5 bln in June, while as expected, the value of loans dropped from 37 bln to 31 bln.

By contrast, debt issuance grew by around 2.3 bln, reflecting government bonds issued to Hellenic Bank in the context of the deal with the Co-op Bank.

The Cypriot banking system has shrunk considerably since it is now calculated to be equal to 303% of the country’s GDP, compared to 631% in 2012 or 428% after the 2013 bailout-required haircut, according to Phileleftheros.

It is estimated that the size of the Cypriot banking system is expected to shrink further in the coming period, mainly due to the packaging and sale of toxic loans planned by banks.

Reportedly, Bank of Cyprus is to proceed with the sale of a new non-performing loan package in the coming months, which may be around €2 bln.

Meanwhile, Hellenic Bank is in the process of preparing a large NPL package, estimated to be worth €1 bln.

RCB Bank, one of the four systemic banks in the country, has also announced a reduction in its size.