Joint Announcement by the Minister of Finance Mr. Constantinos Petrides and the Governor of the Central Bank of Cyprus Mr. Constantinos Herodotou

As per announcement by the Governor of the Central Bank and the Minister of Finance this afternoon, two key legislative priorities have been agreed upon and will be discussed with the House of Representatives for the Bills to by passed tomorrow –

Key summaries of their speeches are detailed below:

• The first legislation concerns the suspension- by law and decree of the Minister of Finance – of repayment of capital installments and interest on loans to financial institutions for a period of nine months until 31/12/2020.

The suspension covers not only businesses but also physical persons and the self-employed who have been paying off their loan instalments so far.

In order to implement the measure, a written request should be made to the financial institutions. With a written request for companies and self-employed persons, their obligation to submit their financial accounts to the Financial Institutions in 2019 will also be suspended.

The second legislation concerns the granting of Government Guarantees totaling up to two billion euros (€ 2,000,000,000) with the aim of:

1. granting new low-interest loans of € 1,750,000,000 to Businesses and Self-Employees to address the financial impact of measures taken to address the coronavirus pandemic, and
2. the subsidy of part of the interest rate to natural persons, self-employed persons and enterprises amounting to € 250,000,000.

• Government guarantees will cover 70% of the losses that may result from the above loans and banks the remaining 30% regardless of whether the loan is secured or not.
• Loans will last from 3 months to 6 years excluding current accounts with a maximum guarantee of 1 year.
• The process of granting government guarantees to credit institutions will begin in early April, and it is expected the first loans to be launched in early May 2020.
• Also includes criteria and conditions for granting government guarantees to credit institutions as well as for lending to Self-Employed and Enterprises such as the maximum amount of loans that can be granted and for what reasons (covering liquidity, working capital and investment needs).
• It is of particular note, the condition that eligible companies and self-employed persons will not proceed with any redundancies from the date of issue of the Decree until 31 December 2020 through the redundancy fund. It is reiterated by the Minister of Finance that all government policy through the taxpayer’s money, including the state guarantee, is aimed at maintaining jobs and avoiding bankruptcy.
• Low interest rates are set for new loans to be granted, in accordance with the European Commission’s State aid provisional framework, for State aid measures to support the economy. Any further reduction in interest rates might be considered as State aid by the EU.
• Interest Rate Example:
  • The total interest rate on new loans for a small or medium-sized enterprise or self-employed person will be:
    • For a secured loan with a maturity of up to one year at 0.75% and with no collateral at 1.25%
    • For a secured loan with a maturity of up to 3 years at 1% and with no collateral at 1.50%
    • For a secured loan with a maturity of up to 6 years at 1.50% and with no collateral at 2%
  • Correspondingly, the total interest rate on new loans for a large business will be as follows:
    • For a secured term loan of up to one year at 1% and with no collateral at 1.50%
    • For a secured loan with a maturity of up to 3 years at 1.50% and with no collateral at 2%
    • For a secured term loan up to 6 years at 2.50% and with no collateral at 3%

The full speech of the Minister of Finance in Greek can be read here Minister of Finance Speech 26_03_20