George AppiosManaging Director and CEO

20th March 2015

Developments in the Banking Sector

20/3/2015 2

The Day of Reckoning for Cyprus Banking System • Government Over-Spending• Public Over-Borrowing• Banks Over-Lending• Under-Regulated

15th March 2013

• Bail-in of Biggest Bank • Resolution of 2nd Biggest Bank• State Aid of 3rd Biggest Bank/Coop• System in Shambles & Capital Controls

BEFORE

AFTER

Banking System effects – Loans and Deposits

20/3/2015 3

€72.5 bln

€61.6 bln

€70.2 bln

€46.1 bln

Dec 2012L/D 103%

Dec 2014L/D 134%

Deposits Loans

20/3/2015 4

• We Had to Rebuild. • We Had the Technology. • We Had the Capability.• We Had to Make the Banking System:

Better Stronger More Reliable

After the Initial Shock

Banking System – Regulatory Changes

• New Definition of NPLs and Provisioning Procedures

20/3/2015 5

Major New Central Bank Directives

• Stricter Anti-Money Laundering Directive

• Arrears Management (Code of Conduct with Clients)

• Restructuring and Loan Origination Rules

• Corporate Governance and Board Members Qualifications

• More Demanding Capital Requirements (CRD4 and CRR)

• ECB Single Supervisory Mechanism

Banking System – Regulatory Changes

• Transparency – Credit Bureaus (Artemis & Aeantas)

20/3/2015 6

Major New Legislative Changes

• Bankruptcy and Guarantor Protection

• Liquidations, Insolvency, Examinership, Administration

• Personal Payment Schemes, Debt Relief Orders

• Establishment of Banking Ombudsman

• Control of Loan Interest Rates and Bank Abusive Actions

• Directives gradually lifting all Capital Controls

Banking System – Issues to be managed

20/3/2015 7

• High Non-Performing Loan Ratios

• Relatively Low Provision Coverage Ratio

• Relatively High Security Coverage Ratios

• Declining Property Values Lead to More Bad Debt Provisioning

• Higher Provisions Lead to More Capital Requirements

20/3/2015 8

Property Drop in Value Historic Index Movement

Jun 15

?

20/3/2015 9

Thank you

спасибо