EY Cyprus has released its third Banking Dynamics Newsletter, a comprehensive analysis of the recent developments in the local banking industry.
“Cyprus’ banking sector appears to be on the path to recovery. With the full abolition of capital controls and the recapitalization of all systemic banks, economic sentiment and confidence in the sector has improved,” commented Savvas Pentaris, Partner, Financial Services.
Though the near term outlook of the banks operating in Cyprus is improving, Pentaris explained, it remains challenging. “Cypriot banks must still deal with the high levels of non-performing loans (NPLs), which remains the biggest threat for the sector.”
According to the Banking Dynamics Newsletter, “the latest Greek financial crisis that almost led to the collapse of the Greek banking sector brought back unpleasant memories of the March 2013 events in Cyprus. Collapse was, however, averted and some stabilisation has since been recorded, with the Greek bank branches operating in Cyprus showing good resilience.”
The very high levels of non-performing loans (NPLs) remain the main challenge of the sector, the Newsletter indicates, with disappointingly little progress achieved since the end of 2014. “After months of delay in their approval by the legislature, enhanced tools enabling the restructuring of loans are now in place, including, inter alia, the adoption of the foreclosure and insolvency framework.” Most recently, it says, the Parliament has passed a bill governing the sale of loans, a prerequisite for the release of the last bailout tranche to Cyprus.
The report details that, since July 2015, bank deposits have been increasing by more than 0.3% per month. Since the beginning of the year, total deposits increased marginally by 0.2%. The deposit outflows after March 2013 had resulted in a 26.9% decrease in total bank deposits in the period leading to September 2015. Meanwhile, the deleveraging in the sector continues, as total loans decreased by 5.5% during the same period.
“Building on efforts to strengthen the financial sector, supervision and regulation is of crucial importance for the recovery of the Cypriot banking system. Overall, the key developments in the sector have been: enhanced regulation and supervision; restructuring and recapitalisation of financial institutions; increasing financial transparency; deleveraging.”
“Cyprus’ banking sector appears to be on the path to recovery. With the full abolition of capital controls and the recapitalization of all systemic banks, economic sentiment and confidence in the sector has improved,” commented Savvas Pentaris, Partner, Financial Services.
Though the near term outlook of the banks operating in Cyprus is improving, Pentaris explained, it remains challenging. “Cypriot banks must still deal with the high levels of non-performing loans (NPLs), which remains the biggest threat for the sector.”
According to the Banking Dynamics Newsletter, “the latest Greek financial crisis that almost led to the collapse of the Greek banking sector brought back unpleasant memories of the March 2013 events in Cyprus. Collapse was, however, averted and some stabilisation has since been recorded, with the Greek bank branches operating in Cyprus showing good resilience.”
The very high levels of non-performing loans (NPLs) remain the main challenge of the sector, the Newsletter indicates, with disappointingly little progress achieved since the end of 2014. “After months of delay in their approval by the legislature, enhanced tools enabling the restructuring of loans are now in place, including, inter alia, the adoption of the foreclosure and insolvency framework.” Most recently, it says, the Parliament has passed a bill governing the sale of loans, a prerequisite for the release of the last bailout tranche to Cyprus.
The report details that, since July 2015, bank deposits have been increasing by more than 0.3% per month. Since the beginning of the year, total deposits increased marginally by 0.2%. The deposit outflows after March 2013 had resulted in a 26.9% decrease in total bank deposits in the period leading to September 2015. Meanwhile, the deleveraging in the sector continues, as total loans decreased by 5.5% during the same period.
“Building on efforts to strengthen the financial sector, supervision and regulation is of crucial importance for the recovery of the Cypriot banking system. Overall, the key developments in the sector have been: enhanced regulation and supervision; restructuring and recapitalisation of financial institutions; increasing financial transparency; deleveraging.”