Coronavirus: Bank of Cyprus welcomes virus loan relief but only for ‘healthy organisations’

The Bank of Cyprus has welcomed the central bank’s decision to relax requirements for giving loans saying it was a “first step for supporting the economy”.

But it stressed that support should only be provided to “healthy organisations”.

An official source at the Bank of Cyprus on Thursday praised the central bank’s speedy action in creating the “conditions required so that banks are in a position to support healthy businesses under national emergency conditions.”

The Central Bank had announced on Wednesday it was relaxing loan origination rules in a move to encourage banks to continue giving loans and adopt a more flexible stance towards businesses and households affected by the coronavirus. It also freed capital reserves of €100m taking the total capital freed up to €1.4bn.

Companies, the self-employed and households, with performing loans, that had been affected by the government measures can apply for loans before the end of June. The loans do not involve monthly repayments but would have to be settled upon maturity in one go.

Many businesses such as shops, restaurants, gyms, hairdressing salons, bars have been obliged to close by the government – one of the measures aimed at minimising the spread of the coronavirus – thus being deprived of any revenue. It is unknown which of these businesses the banks would be supporting with the increased liquidity they have been given.

One banking source, that requested anonymity, warned that “if banks do not succeed in restricting their support to viable organisations, then the support will fail and the effort to protect employment and wages will fail.”

He added that “the biggest challenge is the identification of the healthy businesses that will be supported,” and pointed out that “we have only one chance to succeed in this attempt”.

The note of caution from the bank reflects its concern that it may be faced with a flood of applications given the number of businesses that have had their revenue stream cut off by the measures.

 

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