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Stressed-out banks

By George Telaveris

As systemic banks in Cyprus face the prospect of another round of stress tests, the top bank officials united this week in lashing out at their regulators, especially the European Central Bank.

“The single biggest challenge for small banks is excess regulation,” Chief Executive Officer (CEO) of Bank of Cyprus (BoC) John Hourican told a University of Cyprus conference on Wednesday.

“Dealing with regulations imposed using averages across the eurozone is extremely debilitating to the good practices, and we have to find a way through that,” he said.

Hourican’s remarks follow BoC’s submission on March 31 of its strategic plan, in which it was obliged to explain to its European regulators how it will sharply reduce non-performing loans (NPLs) within three years.

Sources within the BoC denied that Hourican’s criticism had anything to do with ECB demands on NPLs, however.

“Regulators want to know our actions and targets. They are not to tell us what to do or set our targets,” the source said.

Nevertheless, the banks clearly have an issue with regulations, which banks abroad have also criticised for being too unpredictable.

“Investors can’t make calculations, as new banking regulations are being put forward all the time,” the new Hellenic Bank CEO Ioannis Matsis said during the event.

“Reporting costs have increased at the same time as a lot of non-banking regulations, also increasing costs,” Matsis said.

During the summer all European systemic banks will undergo a “stress test regarding their revenues from interest rates”, according to Stockwatch website.

Interest income has been under pressure across Europe as market rates have fallen and banks must now pay the ECB for the privilege of keeping their excess liquidity there.

“We have to live with the weakness of the European banking system and its negative interest rates,” Cooperative Central Bank CEO Nicholas Hadjiyiannis said.

“We are paying the ECB to keep our excess liquidity, which we can’t lend due to the lack of investment opportunities in Cyprus,” Hadjiyiannis said.

Bank CEOs agreed that Cyprus is overbanked and that, with the passage of time, consolidation in the market will take place.

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