Bank of Cyprus and Hellenic Bank will sell bad loans worth € 4bn in total as the banking system seeks to rid itself of toxic debt, Cyprus Governor Constantinos Herodotou said.
Herodotou briefed the House Financial and Budgetary Affairs Committee on Monday, acknowledging that the volume of non-performing loans (NPLs) hasn’t changed much in recent months.
He pointed to two major milestones, by the two largest banks selling loans from their portfolio.
The sale is scheduled for the Bank of Cyprus by the end of February, though Herodotou said he was unaware of Hellenic Bank deadline.
He said both banks are expected to sell loans totalling € 4bn, allowing them to dispose of more than 10 percent of their distressed loans and concentrate on operational issues.
Bad loans in the banking system are 29.3 percent of the total.
Moreover, the CBC’s final position on a complaint handling mechanism for foreclosures is expected at the end of February.
Herodotou told the House Committee that deliberations began on December 6 with the ECB sending a detailed description of the mechanism.
The ECB, after obtaining the related draft bill, sent an unofficial document with initial thoughts.
CBC governor said the ECB generally agrees with modus operandi of the system. Consultation on two issues is pending between the CBC and the Finance Ministry, due next week.
After the consultation is complete, the draft bill will be returned to the ECB around February 6-7, and a response is expected by February 20-21.
Herodotou said the program aims to help banks from being adversely affected, while people can seek redress.