Your Excellency the Minister of Finance, Honourable guests, Ladies and Gentlemen

I would like to welcome you all to this very interesting and extremely topical Seminar of “Solving the problem of non-performing loans through innovative ideas”, organized by the Cyprus Chamber of Commerce and Industry in cooperation with the Ministry of Finance and the European Investment Bank. But first allow me to extend a warm welcome to all of our distinguished guests, who have accepted our invitation and have kindly agreed to share their vast experiences with all of us here today and hopefully assist us in finding our way out of this problem.

There is no doubt that Cyprus program of adjustment through the Memorandum of Understanding with Troika has been successfully implemented. We have witnessed a solid performance in the fiscal sphere, for which the government takes full credit, whilst the banking system was able to gradually recapitalize and inspire confidence to depositors. It was through this very program that the economy was able to move out of the recession into a positive rate of growth in 2015, a factor that could prove crucial in the solution of the NPL problem.

However at this fragile point in the recovery of the economy and whereas Cypriot banks do have adequate liquidity, they are unable to offer new lending and inject new money into the economy due to the limited reactivation and the high level of non-performing loans on their portfolios. Indeed the banks are unable to provide the economy with the required liquidity, failing in their most basic role of funding investments, to the great disappointment and detriment of the business community and society.

We strongly believe that if the problem of NPLs is not effectively solved, it could become an unbearable burden on the economy, preventing it from growth and creation of employment positions. It could prove a negative drag on all our efforts for recovery and may also prove to be a disincentive to the so much sought after foreign direct investment into Cyprus.

Published data reveals the evolution of a very worrying situation. Today, Cyprus finds itself holding the record of all Eurozone countries regarding NPLs as a percentage of total bank lending. The level of NPLs has been gradually growing and according to Cyprus Central Bank has reached €27.4billion at the end of November 2015 despite a very large number of restructurings. This represents 46% of total bank lending and is equivalent to 156% of GDP at current prices clearly a disturbing situation. Comparative data on other Eurozone countries show that Cyprus is followed by Greece where NPLs represent 34% of lending, Slovenia with 28% and Ireland with 21%. The European Banking Authority is alarmed by the evolving trend of rising NPLs across the EU, which it considers to be the most important problem of European banking system at this point in time.

The recent completion of the enactment of the relevant legislation regarding the handling of the NPL situation in Cyprus is a welcomed positive development. However it has been reported that only a small number of cases is being processed under the new legislation. We would therefore urge all interested parties to maximize their efforts.

We note that both government and bank executives have recognized that progress has been achieved in relation to loan restructurings. Nevertheless they all underline the need to further strengthen this effort, something that also has been repeatedly emphasized by our lenders.

We believe that the government has an important role to play in solving the NPLs problem, through implementing all the relevant policies that would assist the reactivation of the economy, enabling businesses to undertake investments, create employment opportunities, and generate profits that would in turn facilitate enterprises and individuals to be able to honor their debt obligations. At the same time it is essential that the Central Bank provides a simplified framework and clear transparent criteria that would assist in Loan Restructurings.

The Institution of the Financial Ombudsman has a complementary and significant function, through mediation, to help reduce the overall burden of NPLs. The Chamber has submitted specific proposals to the government for procedure simplification but also for widening its jurisdiction. The Chamber also calls upon the Banks to assist their clients in meeting their obligations, by ensuring that the appropriate for Cyprus “best practices” are adopted.

We understand that one of the scenarios which will be discussed today will be the establishment of a Bad Bank as was the case in Ireland, or the alternative proposal of an Asset Management Company. We are eager to listen what our distinguished guests have to say and what they consider the most appropriate tool for Cyprus, especially in relation to foreign funding and the distribution of the costs. What we have to keep in mind is that assets and particularly property prices must be carefully managed. Sales of distressed properties must be managed in a way that would allow property prices to adjust gradually for the benefit of all concerned.

We have with us, here today, many local and foreign experts to help us understand the alternatives and are looking forward to listen to the opinions and recommendations of all the participants. We are however particularly eager to hear Innovative proposals, their advantages and disadvantages. Through this cross fertilization of alternative options, we look forward to being able to formulate proposals that could suit the specific circumstances of Cyprus banking system and the culture of our society. The only certainty is that the reduction of NPLs will not be immediately achievable but it would be a long drawn process. The extent of the problem however is such that any further delay is no longer an option. We should address the issues in a decisive and determined manner. The Chamber hereby declares once again its commitment for an immediate solution and is ready to support all innovative and creative proposals.
The ultimate common objective is to overcome the problem and help the country resume investments, achieve economic growth and employment creation conditions.

Concluding I would like to thank the Minister and all those who contributed to the successful organization of this highly promising forum, particularly our foreign speakers who have graciously accepted to address this meeting. Last but not least I would like to thank our sponsors the Bank of Cyprus and Hellenic Bank for their contribution.
Thank you