CENTRAL Bank Governor Christodoulos Christodoulou met senior officials yesterday to discuss a “workable banking system” within the parameters outlined in the UN settlement to advise President Glafcos Clerides during possible future negotiations with Turkish Cypriot Leader Rauf Denktash.
Given the sensitivity of the matter and the delicate stage of the peace plan, no-one at the Central Bank was available for comment on the content of the meeting, although a source at the Central bank said, “The Governor will meet with the President to discuss the matter, and specifically the need to establish two branches (of the Central Bank) on the island. A note will be produced with recommendations to be sent to the President.”
The source also said, “the rumours of money laundering by banks in the north was also discussed.”
On Monday, Christodoulou described the proposals as “difficult to understand and hard to implement.” He also expressed doubts as to the feasibility of maintaining around 60 Turkish banks in the north, many of them in a parlous financial situation, adding that around 100 offshore banks were also operating illegally, often as a front for money laundering.
“It is hard to justify the costs (of setting up another branch of the Central Bank) for an area with a population of around 160,000, with a GDP per head one third (of the GDP in the government-controlled areas) requiring 40 banks,” the source said.
He also called into question the ability of the banks in the north to survive under the “stricter capital adequacy ratios and other criteria applied internationally.”
In the government controlled areas, there are 12 local banks and 28 registered offshore banks.
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