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Bank of Cyprus is awaiting SSM permission before lowering mortgage rates

According to the group's CEO Panicos Nicolaou, the Bank of Cyprus has created a proposal targeted at lowering loan rates, which has been submitted to the Central Bank of Cyprus.

Bank of Cyprus is awaiting SSM permission before lowering mortgage rates

Nicolaou went on to say that the Cyprus Central Bank is presently seeking clearance from the Single Supervisory Mechanism (SSM).

“I hope that in a few days, we will have the green light so that we can announce it,” Nicolaou said during a press conference on the bank’s financial results for the first quarter of 2023.

He stated that the portfolio of first-time homebuyers is "quite large" and "the largest in the market."

“We have at least €1.5 billion in mortgages, which will be affected,” he said, adding that the reduction in lending rates “will affect borrowers who have a mortgage for their first home,” which is serviceable.

In addition, Nicolaou said that “we intend to reward borrowers who are up to date with their payments” and “those who will remain up to date,” adding that “we are following the right process”.

“Those who are affected by the interest rate increases will be rewarded, because not everyone is affected,” Nicolaou said, noting that this includes those “who have not received any other form of relief”.

“We will wait to see what we get and from there we will judge how we will act and what risk we will take,” he stated.

According to Nicolaou, the bank provides "solutions to those who may have temporary problems, either by lowering interest rates or restructuring."

Furthermore, the CEO stated that the bank has €3.6 billion in mortgages to 40,000 customers, with an average loan repayment of 18 years, and that "if the interest rate is reduced by 1%," the instalment will be reduced by €50.

The bank will pay a cash award to existing borrowers whose loan rate is tied to Euribor and has grown during this time period.

Concerning the timing of any fall in lending rates, Nicolaou stated that "we expected there to be a stabilisation" in the rise in interest rates, after which the bank would devise a strategy to lower interest rates.

He went on to say that "at the beginning of January 2023, the interest rate was 2%, and it is now 3.25 percent."

“You can’t change the interest rate too often,” he noted.

Sanctions imposed on Russia

Nicolaou reacted negatively when asked if the bank's response to the penalties was coordinated with the Cypriot government. He highlighted that the bank implements the sanctions independently and does not take orders from any outside body.

Furthermore, Nicolaou stated that anybody affected by the sanctions have the ability to seek exemptions through a specific process.

He emphasised that the individual subject to sanctions might voluntarily request exemptions for "the payment of wages" to their employees, and that neither the bank nor the government will make such requests on their behalf.

Nicolaou, on the other hand, addressed the question of who the sanctioned person would partner with or give services to in order to assure the continuation of their activities and the employment of their workforce.

He also said that “what the President of the Republic said, that this is an opportunity to solve the problem once and for all, is quite apt”.

In response to the closure of the bank's customer accounts, Nicolaou stated that it was done in accordance with the bank's customer acceptance policy, which is continually renewed and was decided prior to the imposition of sanctions against Russia.

He also indicated that the incident was unrelated to the sanctions but happened to coincide with their imposition, causing those outside of Cyprus to associate the two activities.

Furthermore, Nicolaou stated that Russian nationals currently account for under 1% of the bank's savings and almost none of its loans.

Meanwhile, the group's Director of Compliance, Marios Skandalis, stated that the sanctions were imposed on April 12, 2023.

However, the bank had previously made a decision to change its customer acceptance policy, which was authorised by the Board of Directors on March 30.

This policy change resulted in the closure of accounts belonging to around 4,000 people who simply had a Russian passport and lived in Russia.

Finally, Skandalis underlined that, while the bank had considerable legal grounds to act as it did, it also had legal duties.


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