NICOSIA, Oct. 4 (Xinhua) -- Cyprus said Wednesday that agency reports about new rules by the European Central Bank (ECB) that would mostly affect eurozone countries with the highest rate on non-performing loans -- Italy, Greece and Cyprus -- will apply to newly classified bad debts and not existing ones.
The reports said that as of Jan. 1, 2018, ECB would give Eurogroup lenders two years to either wipe out or fully cover non-performing unsecured loans and seven years to cover all secured bad debt.
The head of the inspection department of the Central Bank of Cyprus (CBC), Yiankos Demetriou, said initial inaccurate reports on the new ECB rules had caused serious concern as Cyprus is one of the Eurogroup countries with a high ratio of non-performing loans. Following the 2013 economic crisis, Cyprus was bailed out by the Eurogroup and the International Monetary Fund, which included a radical resolution of the banking system.
"It would be too bad for the banking system of Cyprus if the new rule to apply to existing non-performing loans as agency reports initially suggested inaccurately," Demetriou said.
The new rules were expected to be distributed to all European banks under ECB jurisdiction for consultations, Demetriou added.
Latest reports issued by CBC in September showed that non-performing loans stood at 23 billion euros (27 billion U.S. dollars) or 46 percent of the total, down from over 28 billion euros or over 50 percent of the total at the start of the crisis.
"Non-performing loans still represent a very high proportion of total loans and force banks to set aside considerable sums as provisions for bad loans," said Demetriou.
Under EU rules, Cypriot banks have to make provisions representing an average of 45 percent of total red loans, tying down a considerable proportion of their capital.
Bank of Cyprus, which was made to seize 47.5 percent of unsecured deposits over 100,000 euros to recapitalize as part of the conditions of the 10-billion-euro bailout, said recently that it planned to take action against what its CEO Patrick Hourican called "strategic debtors".
Hourican said that loan owners who did not service their loans on purpose would be hunted down as part of the bank's effort to bring down the proportion of non-performing loans. (1 euro=1.18 U.S. dollars) Enditem
