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Daily Press Review – 24/1/2020

Charge instead of negative rate

Bank of Cyprus has introduced a new policy and terminology concerning deposit rates for specific clients. It is called “liquidity cost charge in euro deposits” and corresponds to a negative interest rate of -0.4%, according to the lender’s website. Letters have also been sent out to concerned parties, Phileleftheros reported on Friday, adding that the deposit charge is basically translated into a negative interest rate. The new data affects state and semi-governmental organisations (except universities and educational institutions) as well as financial institutions – a category that includes brokerage firms, insurance companies, Forex and fund managers. The new charge will be if effect as from the first business day of March 2020 when the deposit rate for this particular group of depositors will turn from zero to negative. Specifically, there will be a charge on the cost of current accounts, savings accounts, and direct access of 0.50% annually on the daily credit balance of the account for these clients. This charge is compared or corresponds to a negative interest rate of 0.4%. Bank of Cyprus charges liquidity costs on 12-month time deposits at 0.10%. The daily term deposit charge corresponds to a negative interest rate of 0.4%. The cost of liquidity on three-month long deposits from March will be charged 0.30% at maturity on the daily balance which is translated to a negative 0.4% interest rate. Reserved deposits are exempt from this policy. What is certain is that the phenomenon of negative returns is coming closer to depositors and this is part of a European Central Bank policy which charges banks with a negative interest rate of -0.50% for excess liquidity. Banks have no choice but to start charging interest rates to big depositors, large corporations and institutional investors. Larger European lenders have long begun to apply negative interest rates. It seems that banks in Cyprus will not apply this measure to retail banking customers, at least for the time being. Hellenic Bank has sent letters to corporate clients to inform them that it will start charging a -0.60% negative deposit rate as of March. For the time being, it appears that the banks will not be applying the measure to their retail banking customers.

 

Focus on the Estia Scheme

A meeting between Finance Minister Constantinos Petrides and the executive committee of the Association of Cyprus Banks on Thursday focused on the implementation of the Estia scheme and efforts to reduce NPLs. According to an announcement by the association, the Committee – comprising its president Ioannis Matsis, three vice-presidents Christakis Patsalides, Constantinos Koutentakis and Yiannis Loizou, and general manager Michalis Kammas – discussed matters concerning the Cyprus economy and the banking sector specifically. All parties involved reiterated their will for close cooperation and productive dialogue, to promote and implement good practices and necessary solutions aimed at reinforcing the Cyprus economy.

 

Could a negative rate be imposed on all deposits?

It is very likely that negative interest rates may also affect the “small” depositors and households, following the decision of Hellenic Bank and Bank of Cyprus to charge their big corporate clients with a negative rate. Speaking to Radio Proto yesterday, CFA Cyprus member Dionysis Sinanos said that the European Central Bank currently charges a negative interest rate on deposits of -0.5%. If the local economy deteriorates and if the global economy goes into recession, then the rate is expected to drop further into negative territory, and even more depositors will be affected. “It is even harder for the banks to handle the cost, if the ECB’s rates drop further. Cyprus banks are already heavily burdened by the large volume of NPLs, which means they cannot grant new loans, because the criteria are stricter and it is a matter of survival for them. Therefore, yes, the negative interest rates could pass onto small depositors too. The banks are profit-making organisations. The problem with the negative interest rates is their profit margin, which is being reduced. As intermediaries, they are stuck between a rock and hard place: on the one hand they want to keep their depositors, and on the other they are trying to ensure their profitability as organisations,” said Sinanos. Either way, the situation is neither simple nor pleasant for the banks, he said, as in an extended environment of negative rates, depositors will start abandoning the banks to seek other saving and investment options.

 

Parliament attempts to mislead over PEP loans

Parliament is attempting to mislead public opinion, through its expressed intention to invite the Central Bank Governor to present data relating to loans, debt write-offs and NPLs held by politically exposed persons (PEPs), sources with knowledge of the situation tell Brief. “This matter is very simple, in proportion to the dimensions Parliament wishes to give it in order to impress and ahead of the 2021 parliamentary elections, with the ultimate aim of letting it slide through the cracks. It has possessed all the information for a while now, while it could have also asked for additional data from the people at the Co-operative’s decision-making centres,” the source said. Most of this information is contained in the House Watchdog Committee’s report on the collapse of the Co-op, dated 1 March 2019, which broadly covers the issue of PEPs’ connections with the Co-op – a credit institution well-known for having powerful political party connections and interventions. The source said, “The independence and autonomy of the Co-ops created a favourable environment for political and partisan influence. The way in which the Co-op secretariat’s members were elected, and in extent the Secretary-Governor, largely reflected the power the parties had on the local community. Very little or even no attention was paid to the capabilities and qualifications of those who were elected to deal with financial issues. This not only resulted in bad banking practices, but it also facilitated discrepancies and abuses, and worst of all, their concealment.” The total sum of PEPs’ loans at the end of August 2017 was around €191m in 2,124 accounts, of which €127m – or 66.4% – were NPLs. The site reminds that after the Co-op was sold to Hellenic Bank and KEDIPES was created, the Auditor-general accused the state asset management company of refusing to hand over the data it had on PEPs’ NPLs at the Co-ops. He wanted to know if the PEPs had favourable treatment when these loans were restructured, so that they could become performing before being transferred to HB. According to the findings of the investigation into the Co-op’s collapse, some €10m’s worth of PEP loans were written off.

 

€400m sale

In the first week of 2020, the Norwegian group B2Holding signed an agreement with Bank of Cyprus to acquire an NPL portfolio, with a nominal value of €400m, which consists of consumption and small business loans without collateral. Following the acquisition, the portfolio will be owned by Waterfall Asset Management and B2Hodling, while the Group’s subsidiary in Cyprus, B2Kapital Cyprus will be in charge of managing it. The transaction has been titled “Velocity 2”. “The acquisition of this portfolio by the Bank of Cyprus, but also the extension of our cooperation with Waterfall Asset Management, makes us particularly happy and proud. We also thank Bank of Cyprus for the close cooperation and the high level of professionalism, thanks to which we managed to finalise the agreement in a short amount of time,” said Johannes Raschke, Chief Investment Officer of the B2Holding Group. Regional Director of Central & South East Europe at B2Holding, George Christoforou, said: “Having acquired two of the four portfolios that were put for sale over the past two years, we continue to seek more investment opportunities in Cyprus. At the same time, however, we also offer a broad range of management services for other institutional stakeholders, who have acquired non-performing loans.” B2Kapital Cyprus was founded in 2017 and it already manages an NPL portfolio it acquired from Hellenic Bank, which includes loans – with and without collateral – to small and medium sized businesses. With NPLs in Cyprus approaching €6.5b, the B2Hodling Group aims to boost its subsidiary’s position in the Cypriot market, but also to offer a reliable alternative platform for the acquisition and management of NPLs.

 

They seek a joint collective agreement for KEDIPES-Altamira  

Trade unions SEK and PEO have called for a Joint Collective Agreement to be drawn up for employees at KEDIPES and Altamira, which will harmonise their employment terms and be binding for any future employer, in a bid to safeguard their labour rights.

 

AstroBank

AstroBank announced that following a special resolution, which was approved at an Extraordinary General Meeting on 14 November 2019, it was renamed from “AstroBank Limited” to “AstroBank Public Company Limited”, as of 10 January 2020.

 

Mastercard: Environmental Initiative

Mastercard announced the launch of the Priceless Planet Coalition, a platform to unite corporate sustainability efforts and make meaningful investments to preserve the environment. Together with partners who share a commitment to doing well by doing good, the Priceless Planet Coalition is pledging to plant 100 million trees over five years. Founding partners in the coalition include Citibank, Santander UK, IHS Markit, bunq, Saks Fifth Avenue, L.L. Bean, New York Metropolitan Transportation Authority, Transport for London, and American Airlines, with more to be announced.

 

Benefit from paying off the IMF loan

Cyprus will manage to save around 90 basis points (BPS) in borrowing costs following its recent double loan transaction to pay off the loan it received from the International Monetary Fund (IMF) during the crisis, the head of the Public Debt Management Office, Phedon Kalozois, told Parliament yesterday. Addressing the House Watchdog Committee, Kalozois said that by raising a total sum of €1.75b with the issuing of two state bonds, one 10-year with a 0.734% rate and another 20-year with a 1.33% rate, with the weighted average interest rate ranging around 0.99%, Cyprus will repay the remainder of its IMF loan which is around €700m, the interest on which is round 1.8%. Furthermore, the money that was raised during the recent bond issue will be used to pay off another bond that was issued in 2010 and expires next month, with an interest rate of 4.625%.

 

City of Dreams is rising

Phileleftheros reports that the integrated casino-resort City of Dreams Mediterranean is rising and has emerged from the ground. The photos that were published indicate the course of the works, that seem to be at an advanced level. Excavators, containers, but also the basis of the building has started appearing. The images show the progress until the 9th of January 2020 and the ground-floor is already visible. It should be noted that the casino will be completed by the end of 2021, therefore a lot more work needs to be done.

 

Hard Rock comments on its elimination from Hellinikon casino race

With an announcement, Hard Rock International said it had been officially informed by the Hellenic Gaming Commission for its decision to eliminate the company from the competition for the Hellinikon casino in Athens. It expressed its disappointment in the process and stressed that it has instructed its legal advisors to evaluate the matter. “While we are disappointed by this news, we are more disappointed in the process. Hard Rock firmly believes it was wrongly disqualified based on an inaccurate rationale and a clear conflict of interest,” the company also said. The Florida-based company said that after instructing its legal advisers in Greece and Brussels to evaluate the matter, it found that the law firm advising the EEEP and the Hellinikon IRC Tender Committee has been representing a member of the rival bidder since 2008. Hard Rock said it had then proceeded to notify all parties involved. Concluding its statement, Hard Rock said all legal actions are taken with the aim to “see that a fair process for the tender is completed and that the technical and financial sections of the submission are opened for both parties to ensure a transparent outcome.”

 

Illegal casino operation dismantled

Turkish-Cypriots allegedly opened an illegal casino at an apartment building in the RoC-controlled area of Nicosia. Members of the Police raided the apartment last Tuesday, and arrested four Turkish-Cypriots, while it is also proceeding with an internet search from the computers that they found at the apartment. The four T/C were presented to the Nicosia District Court Yesterday, which issued a detention decree for two days while at the same time Police is still looking for the owner of the illegal business, who is also Turkish-Cypriot. The four suspects supported that they were working at the illegal casino as employees. The Police was tipped for the operation of the casino on 4 December 2019, while the operation took place on 21 January 2020.

 

 

 

This year’s tourism season lags behind

President of the Paphos Chamber of Commerce and Industry, Thanos Michaelides said that this season’s tourist bookings are lower. More generally, however, despite the loss by Thomas Cook the remaining tour operators and airlines have allocated additional seats for Cyprus to gain the share left by Thomas Cook. According to Michaelides, in light of Brexit, the situation for Paphos is doubtful this year. At present, March and April 2020 reservations are lagging behind the same period last year. It’s very likely that these months will close at lower levels said Michaelides while at the same time, expressed the opinion that if the rest of the months do not perform better, then 2020 may have lower bookings in general.  Asked whether the lower bookings are related to Thomas Cook, he said the drop is attributed to various factors such as external competition, prices, etc.

 

Hospitality Expo Cyprus: The hospitality gates open

The 1st International Exhibition for the Hospitality Industry will be held from 25-27 January 2020 at the Cyprus State Fair Grounds in Nicosia. The Hospitality Expo Cyprus is a specialized event exclusively targeted at professionals in the hotel and wider hospitality industry. The exhibitors have the opportunity to come into contact with potential buyers with serious prospects for profitable agreements.

 

The HIO budget needs to urgently go for a vote at the Plenary

HIO representatives stressed that the HIO budget needs to be immediately passed by the House due to the strict timeframes. Specifically, the House Health Committee discussed the HIO’s budget for 2020 and as its representatives said, they need to immediately proceed with voting it, because a delay would create problems. As such, the Committee committed that the budget will go to the Plenary for a vote on 7 February. As it has emerged, the GHS’ budget will have a surplus of about €60m, while the System’s implementation is considered to be satisfactory, despite the problems. According to the information that was given, 1,320 specialised doctors are registered in the GHS, 475 personal doctors for adults and 188 paediatricians. The deputy general director of HIO, Athos Tsitonitides said that the projected expenses for 2020 will amount to €969m and the projected proceeds will amount to €1.050b. He added that the HIO will start its dialogue with private hospitals, expecting that the developments will contain the budget. In case anything else is needed, the HIO will return. During the budget presentation, the president of HIO, Thomas Antoniou, said he was touched since the Budget he presented was the first GHS budget that was in full compliance since 1 June. “The fact that the GHS has started is due to the steady effort and support of the House Health Committee”, he underlined. Mr Antoniou also said that he prepared a document for the implementation course of the GHS that it needs to submit to the House, adding that the Organisation needs more staff, so that it can fully complete its mission. He added that there are complaints and problems that keep on getting worse. He observed that there were some doctors who needed time to adapt to the changes, while many times, a doctor needs to prioritise patients who have referrals and examine only the urgent cases. “Some patients pressure their doctors to refer them and prescribe them lab exams”, he added, “pointing out that most doctors are competent and are able to resist pressures”. He further underlined that the GHS needs to protect the patient and the system from abuses. Reportedly, 124 doctors have been investigated for potentially abusing the system, and until now the HIO has penalised doctors by cutting payments totalling €1.3m.

 

Prioritising an action plan against cancer 

In an interview during her visit in Athens, the Health Commissioner Stella Kyriakides says that “it’s difficult for me to accept that in the same EU which seeks to equally represent all of its citizens, access to healthcare is not equal to all”. She discusses her priorities which relate to tackling cancer through the development of a common European action plan, as well as the implementation of sustainable ways or production and packaging of foods. She highlights the need to raise awareness about vaccination, as scepticism, fake news and myths surrounding this issue have only resulted in a series of problems. Lastly, she welcomes the efforts of the Greek government in implementing the smoking ban. The consequences of smoking are common knowledge and she says that the scheme has been implemented in other EU countries for years, and has proven to be successful in significantly reducing the use of tobacco products and smoking.

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