Cyprus implements strategy to reduce non-performing loans

NICOSIA, May 5 (Xinhua) -- The Cypriot Finance Ministry has prepared a strategy to effectively and swiftly cut down non-performing loans (NPLs), the most serious residual problem from the 2013 financial crisis, Finance Minister Harris Georgiades said on Saturday.

"Developments up to now show things are moving towards this direction," he told state radio when asked whether the target of reducing NPLs by 40 percent at the end of this year could be met.

This means red loans could be brought down from 20.6 billion euros to 12.4 billion euros at the end of 2018, or just below 24 percent of the banks' loan portfolios.

NPLs represented 43.7 percent of the loan portfolios at the end of 2017, and cut deep into the profitability of all banks, which are formed to make increased provisions for contingencies and deleverage.

NPLs was one of the most notable effects of the March 2013 crisis, from which Cyprus was helped out under a 10-billion-euro 3-year economic assistance package by the Eurogroup and the International Monetary Fund (IMF).

The Finance Ministry said in a statement that it has submitted a stability program to the European Commission for the 2018-2021 period, providing for measures to bring down NPLs.

It includes additional legal measures to manage non-performing loans, such as the introduction of electronic auctioning of mortgaged properties and the creation of a secondary market for MPLs, a more transparent, efficient and effective foreclosure framework, and enhancing of the capabilities of the government's insolvency service.

The state has already pumped an additional 2.5 billion euros into the nationalized Cyprus Cooperative Bank, acquiring all of its non-performing loans. The government has put the lender on sale as a whole or in part and it expects firm offers by prospective investors by the middle of May.

It has also implemented a plan called "Estia", named after the Greek goddess of domesticity, under which a fund will help debtors with a mortgage on their primary residence to gradually repay their loans and salvage their homes.

"Through burden sharing, the incentive scheme aims at supporting vulnerable households, enabling them to meet their obligations to the extent possible, thus contributing to the stabilisation of the banking sector and the creation of conditions for sustainable growth," the statement said.

The strategy will cost taxpayers up to 0.4 percent of annual economic output and add 11.7 percent to the sovereign debt, according to the ministry estimates. Enditem