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Cyprus Internet Directory [ Finance Minister puts the squeeze on banks ]

Finance Minister puts the squeeze on banks

FINANCE Minister Charilaos Stavrakis set a strong message to the banks yesterday, saying their “continuous demands” on the government had “gone too far” and that any further help by the government on liquidity must be accompanied by an equivalent reduction in lending interest rates.

Stavrakis said: “We have put €2 billion of cheap liquidity in the pot through government bonds, we have taken the move with the European Investment Bank for extra help for small and medium-sized enterprises in Cyprus, we have offered a lot of things to the banking sector.

“We have been very sad to see that despite the fact that all these moves have significantly reduced deposit interest rates – from seven per cent last October to below four per cent – lending rates have not gone down. On the contrary, the banks are trying to increase their profit margins during an extremely difficult period for the economy.”

“This can no longer be tolerated and any renewal of those bonds will be accompanied by conditions which will oblige the banks to pass all the beneficial effect on to borrowers”, the Minister said, adding: “This is a commitment of both the Finance Ministry and the government.”

Stavrakis was responding to media questions regarding the €2 billion in government bonds currently providing cheap liquidity to the commercial and co-operative banks, which mature at the end of the year.

According to reports, the Association of Cyprus Banks (ACB) has asked the Finance Ministry to clarify what would happen when the bonds mature, as any gap between the maturity dates and the issuing of new government bonds in 2010 would put them in the position of not complying with Central Bank requirements on liquidity ratios.


(Source: Cyprus Mail)
Copyright © Cyprus Mail 2008 Please contact Cyprus Mail for the copyright terms of this article.



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