Мы в Telegram
Добавить новость

Чудеса в ЖКХ: кому отменили комиссию за квартплату

Тулячки выиграли Континентальную футбольную лигу

Какие праздники отмечаются 13 мая 2024 года, что важного произошло в этот день

В Москве лифт оторвал 10-летней девочке средний палец

News in English


Новости сегодня

Новости от TheMoneytizer

Cyprus government and banks piling-up cash

comment les the selfish behaviour of cyprus banks is reflected in their failure to pass on the high deposit rates they receive from the ecb onto the deposits of their customers

They could do more to support economy and citizens

Over the last two years the Cyprus government has produced mounting surpluses and boosted substantially its cash balances at banks. And during the same period Cyprus banks have continued to hold over 36 per cent of their assets in cash, while limiting loans and advances extended for financing real economic activity.

The government with its generation of mounting surpluses and running down of its debt just seems to be trying to impress credit rating agencies rather than using its financial resources efficiently to support the real economy and public welfare. Indeed, the government is severely restricting its expenditures to produce surpluses.

In truth, apart from being generous with certain building contractors and in payment of salaries to its expanding army of employees and advisors the government is pursuing a policy of austerity. Quite strikingly, government expenditure as a share of GDP was 40.2 per cent in 2023 compared with an average for the euro area of 50 per cent. This is a troubling and irresponsible difference, and reflects the failure of the government to spend adequately on the provision of social security and green and digital transitions, given its obsession with achieving a fiscal surplus that was equal to 3.1 per cent of GDP in 2023 as against an average deficit of 3.6 per cent of GDP for euro area members.

Such austerity that is being misleadingly labelled as fiscal prudence and discipline by, among others, President Nikos Christodoulides and House president Annita Demetriou is reflected glaringly in meanness in the allocation of funds in assisting vulnerable persons suffering from cost-of-living problems. Indeed, the latest government package of measures aimed at helping suffering households and businesses with electricity subsidies and social assistance to vulnerable families comprises an allocation of only €35 million at a time when by end-February 2024 the government had accumulated cash deposits of over €3.5 billion at the Central Bank and €2.1 billion at commercial banks.

And the government is piling-up revenue and cash by over-taxing households and businesses via the effects of inflation. With personal income tax rates unchanged, incredibly, since 2011 the impact of inflation on wages and salaries has dragged persons into higher tax brackets, substantially reducing their real disposable incomes in the process. Furthermore, government revenues have benefitted substantially from the higher prices of goods and services boosting VAT receipts, which in 2023 rose by over 10 per cent compared with 2022.

Furthermore, the government is failing to undertake investments aimed at reducing carbon emissions in line with the European Climate Law, but instead continues to promote high-end property “development” with the generous issue of building permits and the failure to penalise developers for their numerous violations of environmental regulations.  Such policies not only damage the natural environment, but ordinary citizens are burdened with higher taxes because of the failure of the government to meet commitments on reducing carbon emissions as well as being confronted with unaffordable housing costs.

Banks

Cyprus bankers have long contended that their activities, particularly in providing credit, have been the lifeblood of the Cyprus economy, and that most of their income comes from doing business locally. But, data on the operations of Cyprus banks over recent years reveal that they are doing little to positively support economic development through lending money to businesses that can buy capital equipment and hire workers.

Most notably, in 2023 Cyprus banks raised their profits by 744 per cent to nearly €1.3 billion by depositing over 30 per cent of their assets as cash balances with the ECB “earning” up to 4 per cent per annum in interest income. Indeed, estimates based mainly on the financial statements of the Bank of Cyprus and Hellenic Bank indicate that the increase in interest income of Cyprus banks from the ECB was around €660 million in 2023, being equivalent to about 60 per cent of their tremendous rise in profits.

Indeed, with the ECB offering banks up to 4 per cent interest on their overnight deposits there has been a strong incentive for banks to extract such easy risk-free income short-term, rather than extending riskier loans long-term to businesses and households at higher interest rates. In fact, the cash balances of Cyprus banks at end-2023 of €23.7 billion exceeded their outstanding loans and advances of €23.1 billion.

This composition of assets sharply contrasts with that of the systemically important banks in Europe, which on average held a much lower proportion of their assets in cash and cash balances with Central Banks of just 13 per cent in 2023, and used over 62 per cent of their assets in loans and advances compared with a pitiful 36 per cent for the four largest Cyprus banks.

Furthermore, the selfish and anti-social behaviour of Cyprus banks is reflected in their failure to pass on the high deposit rates they receive from the ECB onto the deposits of their customers, with most banks still suppressing rates on fixed-term deposits to well below the current rate of inflation.

Dealing with challenges

A key challenge for both the Cyprus government and banks is to allocate their resources more efficiently, and not just pile-up cash, in order support the real economy and serve its citizens much better.

While the government should cut back its bloated wage and salary bill for employees and advisors, well-targeted expenditures on social benefits and for the care economy as well as for projects to bring about the green and digital transitions under the Recovery and Resilience plan need to be increased substantially.

But, to greatly facilitate the reallocation of government resources the systemic corruption and tax evasion plaguing Cyprus needs to be ironed out. In this connection, there is an overwhelming need to eradicate the graft associated with the frequent award of large-scale infrastructure projects to contractors, in the absence of any decent studies of their economic viability and potential damaging effects on the environment. And the Cyprus authorities should fundamentally reduce the extreme tolerance of tax evasion and debt defaulting they give to big companies that enable them, such as developers over-supplying the property market with their wasteful use of resources, to continue to operate.

In addition to reducing fiscal surpluses, government funds for financing the greater spending on priority projects and programmes can be boosted significantly by combatting tax evasion, the reintroduction of a central government progressive tax on immovable property, and adjustments in the progressivity of antiquated personal income tax rates for inflation.

A major challenge for the new governor of the Central Bank is to induce Cyprus banks to deploy much more of their assets in extending productive loans to finance real economic activity as against holding very large amounts of cash in order to make short-term profits. In this endeavour the governor, as a member of the ECB council, needs to argue that a significant reduction in the ECB overnight deposit rate below 4 per cent should encourage banks with considerable surplus liquidity to deploy their excess reserves more in providing interesting-bearing loans to finance real economic activity.

In addition, moral suasion should be used by the Cyprus authorities to entice banks to extend longer-term loans to finance priority investment projects. And if bankers continue to show a limited interest and a lack of competence in seeking and appraising worthwhile investments to finance, serious consideration should be given to setting-up an independent Development Bank, that would be tasked with evaluating and financing large-scale investment projects.

Furthermore, if Cyprus banks continue to earn very high profits from activities that hardly support the real economy, then such profits should be subject to greater taxation so that part of the income of banks can be returned to the economy and society.  Notably, banks in countries such as Italy, Spain, Latvia and Estonia in the Eurozone, which had much lower rates of profitability than Cyprus banks in 2023, and where they derived more of their profits from contributing to real economic activity, have been required to pay additional taxes on their recent higher profits.

Bank deposits are the main means for saving by Cyprus households. And through raising competition between banks and moral suasion, Cyprus banks should be pressured to raise deposit rates above the ongoing inflation rate so that holders of fixed-term deposits do not suffer erosion of the real value of their savings. And in this respect, the government could help by lowering the defence tax rate on interest income from the current 17 per cent to say 5 per cent.

 

Table 1

 

Cyprus Banks               Bank of Cyprus         Hellenic Bank

(in millions of euro)

2022        2023               2022      2023             2022     2023

Income statement

Interest income                                         1,171.8     2,461.7           450.8      985.5           341.4    680.3

from ECB[1]                                                76.0           736.0           33.0       310.0             28.2    268.4

Interest expenses                                          195.8          538.8           80.4       193.3            40.6     144.0

Net interest Income                                     976.1       1,922.9           370.4      792.2            300.9    536.3

Net operating income                                1,415.1      2,523.0           672.6    1,102.8           402.4   664.3

Profit                                                                171.4       1,275.7             59.4        488.9             21.8   365.4

 

Balance Sheet[2]

Cash balances at Central Banks                        24,783.0        24,675.5      9,567.3    9,614.5        8,468  8,223

Loans and advances                                           24,347.6        24,079.1      9,953.3   9,821,8         6,033  6,024

Total assets                                                            63,749.4        65,201.7     25,288.5  26,628.6    19,965 20,062

Deposits                                                                 57,969.6        57,383.0     18,998.3  19,336.9    15,928 15,315

Equity                                                                        3,747.0         5,062.7         2,048.6   2,488.3      1,130   1,506

Sources: Central Bank of Cyprus, Announcement on profitability and balance sheets of Cyprus banking sector, April 9, 2024; Financial statements of the Bank of Cyprus and the Hellenic Bank for 2022 and 2023.

 

 

Les Manison is a former senior economist at the International Monetary Fund, an ex-advisor in the Cyprus finance ministry and a former senior advisor at the Central Bank of Cyprus

[1] Estimates of interest income from the ECB based largely on data provided in the financial statements of the Bank of Cyprus and the Hellenic Bank for 2022 and 2023.

[2] Data for the assets and liabilities of banks are for end-year.

Читайте на 123ru.net


Новости 24/7 DirectAdvert - доход для вашего сайта



Частные объявления в Вашем городе, в Вашем регионе и в России



Smi24.net — ежеминутные новости с ежедневным архивом. Только у нас — все главные новости дня без политической цензуры. "123 Новости" — абсолютно все точки зрения, трезвая аналитика, цивилизованные споры и обсуждения без взаимных обвинений и оскорблений. Помните, что не у всех точка зрения совпадает с Вашей. Уважайте мнение других, даже если Вы отстаиваете свой взгляд и свою позицию. Smi24.net — облегчённая версия старейшего обозревателя новостей 123ru.net. Мы не навязываем Вам своё видение, мы даём Вам срез событий дня без цензуры и без купюр. Новости, какие они есть —онлайн с поминутным архивом по всем городам и регионам России, Украины, Белоруссии и Абхазии. Smi24.net — живые новости в живом эфире! Быстрый поиск от Smi24.net — это не только возможность первым узнать, но и преимущество сообщить срочные новости мгновенно на любом языке мира и быть услышанным тут же. В любую минуту Вы можете добавить свою новость - здесь.




Новости от наших партнёров в Вашем городе

Ria.city

Аутсайдер РПЛ "Сочи" победил "Пари НН" со счетом 6:1

Эквайеры спускаются в подземку // Банкиров привлекают большие обороты по счетам метрополитена

Песков: Герасимов продолжит работу на посту начальника Генштаба ВС России

Путин снял Шойгу с поста министра обороны РФ

Музыкальные новости

В театре «Модерн» состоялась премьера моноспектакля «Исповедь счастливой женщины. Эдит Пиаф»

"Динамо" обыграло "Балтику", дважды забив в компенсированное время

Как надо ПРОДАВАТЬ СЦЕНАРИЙ, ПЬЕСУ, СИНОПСИС.

Собянин поздравил Мишустина с назначением на пост председателя правительства РФ

Новости России

Чудеса в ЖКХ: кому отменили комиссию за квартплату

Аналитики оценили изменение высоты новостроек в городах России за 5 лет

Путин снял Шойгу с поста министра обороны РФ

Какие праздники отмечаются 13 мая 2024 года, что важного произошло в этот день

Экология в России и мире

Традиции и инновации: Развитие онлайн-казино в Казахстане

Сервисное локомотивное депо «Иваново» реализует программу по замещению импортных деталей и узлов аналогами отечественного производства для тепловозов серии 2ТЭ116УД

Оксана Федорова представила на выставке-форуме «Россия» премьеру фильма «Петербург Шаляпина и Рахманинова»

Мини-конференция по продвижению дизайнеров DesignBlogFest 2024

Спорт в России и мире

Рублёв в трёх сетах обыграл Маркоса Гирона и вышел в третий круг «Мастерса» в Риме

Саснович вышла в третий раунд турнира WTA-1000 в Риме

Потапова проиграла Остапенко во втором круге турнира WTA 1000

Теннисист Хачанов вышел в третий круг "Мастерса" в Риме

Moscow.media

Откровение артиста госцирка Бурятии Саяна Дондокова - Театр и дети, Культура и Россия, интервью

Велоретро

"Помогу оформить детские пособия". Почему имя Мухаммад бьёт рекорды в ХМАО

АвтоВАЗу не хватает рабочих для выпуска Ларгусов. На завод привлекают вахтовиков











Топ новостей на этот час

Rss.plus






В Москве лифт оторвал 10-летней девочке средний палец

Какие праздники отмечаются 13 мая 2024 года, что важного произошло в этот день

«Бавария» победила «Вольфсбург» в 500-м матче Нойера в Бундеслиге

Аналитики оценили изменение высоты новостроек в городах России за 5 лет