Europe News:CEOs: Cyprus banking system facing challenges

The Cyprus banking system is facing numerous challenges according to the CEOs of the three systemic banks: Bank of Cyprus(BoC), Cooperative Central Bank(CCB), and Hellenic Bank(HB).

John Hourican(BoC), Nicholas Hadjiyiannis (CCB), and Yiannis Matsis (HB) made their comments at an event hosted by the University of Cyprus titled “Challenges and Prospects of the Cyprus Banking System”.

Hourican addressed the audience first, saying that it is a mistake to think that the banking system in Cyprus operated perfectly before the crisis since, as he said, non-performing loans began to pile up 20 years before the crisis.

At the same time he noted that the banking system, though restructured, more transparent and “highly regulated”, is facing an existential threat in digitisation.

Hourican also noted as a large challenge for the viability of small banks the imposition of extreme regulations.

The BoC CEO also said that Cyprus is overbanked and that with the passage of time, consolidation in the market will take place.

Co-op CEO Nicholas Hadjiyiannis spoke of opportunities in today’s banking system, in spite of the many challenges.

Hadjiyiannis noted that there are many challenges, such as NPLs. In 2016, the CCB reduced its loans in arrears beyond 90 days by €1.2 billion said the CCB CEO.

What is necessary are holistic plans and strategies said Hadjiyiannis, adding that the improvement in the economy is helping the bank’s finances.

“At the same time we are part of the eurozone and unfortunately we must live with the weaknesses of the European banking system”, said Hadjiyiannis.

Hellenic Bank CEO Yiannis Matsis said that the regulations are punishing and disproportionate, in the sense that smaller eurozone banks face the same regulations with the larger banks.

Matsis agreed with Hourican that Cyprus is overbanked, which creates opportunities for consolidation.

The existence of many banks, he said, in combination with the fact that the Cyprus economy is characterised by “concentration”, create the need for banks to protect themselves from concentration.

At the same time, said Matsis, this combination creates competition, which in turn loosens the lending standards for banks, which is in part what led to the crisis in the first place.