Finance Minister Makis Keravnos said there are still challenges the banking sector must address, but he expects additional positive measures from banks to their struggling customers.
At the ‘Banking System: New Challenges and Opportunities’ conference in Nicosia, he said successive rate hikes have impacted the economy, noting that banks have adopted some positive moves.
In his speech, the minister said that the Cyprus economy has demonstrated exceptional resilience in recent years, effectively coping with many difficulties and challenges.
“The banking sector, having made remarkable progress in recent years, with a strong capital base and liquidity, has played a decisive role in this collective effort and is expected to continue to do so.”
He said one of the main challenges for the banking sector is the series of repeated interest rate rises by the European Central Bank, creating a cost-of-living crisis.
“These successive interest rate increases have significant and multifaceted implications for the economy, as they raise the cost of borrowing for housing, education, and other essential financing needs, limiting the available household income.”
Although banks have made some steps to absorb the increased cost of interest rates and deposit rates, Keravnos wants banks to assume their social responsibility and anticipates additional positive moves.
He said the percentage of Non-Performing Loans has decreased significantly and is good for the economy, as it proves that efforts to manage NPLs and the banking sector’s recovery have begun to yield results.
Keravnos said the two quantitative targets set by the Resilience and Recovery Plan regarding NPLs have already been met and contribute to the disbursement of the next tranche from the fund.
The Finance Minister said the banking map in Cyprus has changed radically in the last decade, and the government considers any acquisitions and mergers to indicate a healthy sector and operation of free market rules.
“Structural changes, whether through acquisitions or technological upgrading, are expected to contribute to strengthening competition and improving financial services for consumers.”
He argued that positive ratings from international rating agencies are an important sign of confidence, “showing that we are on the right path to economic recovery”.
“It is important to continue monitoring developments and taking effective measures where necessary to ensure our well-being and credibility domestically and internationally.
“I look forward to the cooperation of all of you in mitigating the consequences in the market and households from increased interest rates and actively participating in providing national and European financial tools to facilitate businesses’ access to financing.”