COVID19: Central Bank frees €1.4 bln for banks to help clients

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The Central Bank of Cyprus has freed an additional €100 mln bringing total capital buffers to €1.4 bln in a bid to encourage banks to continue lending and be more flexible to business and households affected by coronavirus.

It urged commercial banks to show more flexibility in dealing with borrowers affected by the epidemic, offering restructuring that includes suspension of instalments on capital, interest or both for a period of nine months.

The Central Bank also said it is considering further measures which will be announced within the following days.

This decision came after the Single Supervisory Mechanism relaxed the banks’ capital requirements freeing up capital amounting to €1.3 bln for Cyprus’ systemic banking institutions.

In a statement, the CBC said it will free capital reserves for the banks directly under its supervision amounting to €100 mln.

“The total capital freed up to €1.4 bln is made with the purpose to transmit the benefit from the banks to the economy, via favourable restructurings to both businesses and households,” the CBC said.

The CBC also decided to relax loan origination criteria to assist affected businesses and households to obtain the necessary credit to cover their current obligations.

Companies, the self-employed and public sector workers affected by the government measures can apply for such loans until June 30.

The relaxed criteria concern the evaluation of loan repayment capacity and the submission of the necessary documents.

These new credit facilities cover overdrafts, short-term loans with payment upon maturity without monthly instalments.

The CBC urged local banks to show the “necessary” flexibility to stricken businesses and households by offering restructurings, including suspension of capital or interest instalments or both for a period of nine months.

Banks were also advised to provide lower interest rates for both new loans and restructured facilities and not to charge loan origination fees.

Furthermore, the CBC called on Credit Acquiring Companies to provide short-term restructurings to distressed borrowers affected by the government measures to contain the spread of coronavirus.

The CACs can deviate from the requirement to follow detailed evaluation procedures and restructuring approval for a period of nine months.