“We are in dialogue with the European Investment Bank, but there has been no conclusion, the talks are on-going,” he said at a House Commerce committee meeting.
“There is a simple limitation when you want to set up a bank. You need capital, lots of it, in order for the venture to have any meaning. “At this time,” added Georgiades, “we do not have the resources to raise this kind of capital.”
He said the government has reached out to other funding sources, such as the European Bank for Reconstruction and Development (EBRD), but that these overtures did not meet with success.
On the EBRD, the minister said it had recently opened offices in Cyprus with a view to investing between €500 million and €700 million into the economy over a five-year time span.
Late last year the EBRD said it planned to invest at least €100 million annually in Cyprus’ financial and energy sectors as well as in privatisations. The EBRD, which is owned by the European Union, the European Investment Bank and 64 countries, made a €107.5 million investment in Bank of Cyprus in mid-2014 and it now holds a 5.02% stake in the bank.
On the EIB’s lending programmes, worth a total of €300 million, the minister said he was “cautiously optimistic,” adding that since the beginning of 2015 local commercial banks have started giving out and advertising these loans.
The scheme involves government guarantees worth €300 million for bank loans that will finance development projects and small and medium businesses (SMEs). The lending criteria to SMEs are set by Cypriot banks.
Georgiades said that as far as he knew, at least one local bank has already lent out half the initial amount at its disposal; other commercial banks had not started lending yet.
On another EIB lending facility to SMEs, worth some €100million, Georgiades said that local commercial banks would contribute 50%. The scheme will offer loans at interest rates from 3.4% to 3.9%. So far, the EIB has struck a deal worth €20 million with Bank of Cyprus.
Regarding the €300 billion EU-wide financial instrument proposed late last year by European Commission President Jean-Claude Juncker, Georgiades said this was another prospect to tap into funds.
The Juncker plan, he added, was at the final stage of planning. “We are in constant contact to see what would be the best way of making use of this prospect,” the minister said.
Financial commentators have criticised Juncker’s financing scheme as being excessively leveraged and thus risky.
Cash-starved Cyprus is looking to tap financing to reverse an economic slump following the events of March 2013, when its second-largest commercial bank was wound down as part of an international bailout deal.
Source: Cyprus Mail
