Bank of Cyprus and Hellenic to offload €4 bln in toxic loans

Largest lenders Bank of Cyprus and Hellenic Bank will sell bad loans worth €4 bln in total as banking system tries to purge itself of toxic debt, Central Bank of Cyprus governor Constantinos Herodotou said.

Herodotou on Monday briefed the House Financial and Budgetary Affairs Committee, noting that the amount of non-performing loans (NPLs) have not changed much during the last few months.

He pointed to two major milestones, by the island’s two largest banks to sell loans from their portfolio.

The sale is expected by the end of February for the Bank of Cyprus, while Herodotou said he was unaware about the date for Hellenic Bank.

He said both banks are expected to sell loans worth €4 bln in total, allowing them to dispose more than 10% of their problematic loans and concentrate on operational matters.

Latest data shows that bad loans in the banking system are 29.3% of the total.

Moreover, the final position of the European Central Bank (ECB) regarding a complaint handling mechanism on foreclosures, prepared by the CBC, is expected in late February.

Herodotou told the House Committee that deliberations with the ECB started on December 6, with the CBC sending a detailed description of the mechanism.

After receiving the relevant draft bill, the ECB sent an unofficial document with its initial thoughts.

The CBC governor said the ECB agrees in general with the mechanism’s modus operandi. Consultation on two issues is pending between the CBC and the Finance Ministry, which is scheduled to take place next week.

After the consultation is complete, the draft bill will be sent back to the ECB at around February 6-7, and a reply is expected by February 20-21.

Herodotou said that the plan aims to help banks avoid being adversely hit, while people will be able to seek redress.