Overcoming Private Debt (Unblocking the Loan Burdened Real Economy in Cyprus)

Savvides, Savvakis C.

doi:10.2139/ssrn.2784680

Cited by 4 publications

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“…Cyprus' total private debt in 2013 was at a world record high of about 350% of GDP ( Figure 1). Moreover, while the loans weighed almost totally on Cypriot companies and households, as pointed out by Savvides (2016), the deposits were owed to a large extent to foreigners.…”

Section: Private Debt Holding the Economy To Ransommentioning

confidence: 99%

“…Additionally, under the forthcoming MFF, NDBs will be entrusted with the implementation of FIs, along the EIB, which will, for the first time since its establishment, no longer be the exclusive managing authority 9 . Cyprus has currently no institution to participate to this Source: Savvides (2016) Within such an environment, the main systemic banks will concentrate on their healthy portfolio, while they should be ready to participate in project financing solutions put together in co-operation with the NDB/DFA. Preferably, these new Special Purpose…”

Section: Figure 2 -Total Private Debt As % Of Gdp (2004-2017) By Selementioning

confidence: 99%

“…The use of the recourse open to the banks to collect on their collaterals and guarantees is often presented as a cure to the economic woes of the country. However, as often remarked(Savvides 2016(Savvides , 2015(Savvides , 2014), this will lead to huge loss of value and a need for further recapitalisation it does nothing to tackle the root cause of the problem which is the restructuring and funding of viable economic projects in order to start rebuilding the economy on sound foundations.…”

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confidence: 99%

“…The current attempts to restructure the existing loans within the shell of the current balance sheets of existing companies is, in most cases, doomed to fail. The excessive and wasteful take up of debt during the "happy years" by these companies hinders and obstructs the viability and the possibility of striking a satisfactory repayment capability even for new potentially viable projects.Source:Savvides (2016) In this manner, credit-constrained firms will be substantially enabled to become more efficient and have their loan obligations reduced to the point where their survival is not constantly being threatened by excessive debt. If debt reduction is applied in a structured and professional manner, on a case-by-case basis, competitive but yet highly indebted companies can be presented with a path towards a normal and manageable funding structure often through a new SPV.…”

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confidence: 99%

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Funding Economic Development and the Role of National Development Banks - The Case of Cyprus

Kavvadia

Savvides

2019

SSRN Journal

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The paper draws on previous research on the role of Multilateral Development Banks (MDBs), Regional Development Banks (RDBs) and National Development Banks (NDBs). It examines the role of the Cyprus Development Bank (CDB), prior its privatisation in 2008, in the economic development of the country and, specifically, its intermediation of international finance from multilateral and regional development banks. Currently, this function is undertaken by the commercial banks, which are however limited by a balance sheet fatigue, resulting from the excessive levels of private debt, as shown in this paper. Moreover, the commercial banks lack necessary elements in successfully executing this key role. They do not have the professional competence as well as the discipline and culture for executing such a highly demanding role in the economy. Last but not least, and judging from the experience of the CDB it is imperative to have a totally independent and competent financing institution, which will lead by example. Further to the analysis of the current macroeconomic and institutional context in Cyprus, there is a void of institutional capacity to fund projects and offer valuable advice to state and private decision-making bodies on decisive development projects. This paper recommends the establishment of an NDB or a National Development Finance Agency (NDFA), and proposes an appropriate model.

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Section: Private Debt Holding the Economy To Ransommentioning

confidence: 99%

Section: Figure 2 -Total Private Debt As % Of Gdp (2004-2017) By Selementioning

confidence: 99%

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confidence: 99%

mentioning

confidence: 99%

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