Cooperation necessary to maintain financial stability, say FinMin-CBC Governor

Cooperation between the Ministry of Finance and the Central Bank of Cyprus is necessary to keep the country's economy in the right framework of financial stability, especially under the current geopolitical conditions, Finance Minister Makis Keravnos has said.

He was speaking on 22 April, following his meeting with the newly appointed Governor of the CBC, Christodoulos Patsalides.

In statements after the meeting, Patsalides said that the CBC's primary concern is the financial stability of the country and noted that ways must be found to reduce the disparity between deposit and lending rates in favour of the economy.

Keravnos spoke of a thorough discussion on issues of general concern to the economy of Cyprus and financial stability which must be maintained.

He also said that they discussed the different ways and scope of their cooperation, which he said is necessary to keep the economy in the right framework of financial stability, especially under the current geopolitical conditions creating negative effects on the economy, adding that he will have a continuous and close cooperation with Patsalides for the common benefit of the economy.

On his part, Patsalides said that today's first meeting with the Minister of Finance in his new capacity as Governor of the CBC is a continuation of the cooperation they had developed in his previous capacity, as an advisor to the President, which, he said, will contribute even more towards a constructive cooperation between the two sides.

He added that there are many challenges and that there is uncertainty, but Cyprus has shown many times that it is resilient and that it can return to normality, adding however that this fact should not allow for complacency as there are other issues beyond the geopolitical challenges as to which we should be cautious.

"Our primary concern as the Central Bank is the financial stability of the country and we will contribute as best we can to achieve this goal," he noted.

Asked about his main priorities regarding the stability of the financial system, Patsalides noted that his first priority is to be fully and extensively informed, with an information programme which, he said, ends on 14/5, and then he will organise a press briefing with media representatives.

Asked if more actions are needed in terms of the interest rates, the CBC Governor said that his participation in the ECB's Governing Council takes place in his personal capacity, in accordance with Cypriot and European legislation, and he is obliged to take decisions in the interest of the Eurozone.

"I believe that the ECB's official interest rates are at the right level so that the 2% inflation target can be achieved in the medium term and we are waiting for more data to see what path interest rates will follow," he said, adding that there are also uncertainties related to developments in the Middle East.

Referring to Cyprus in particular, Patsalides said there is a big difference between deposit and lending rates, which he said is due to the small size of the Cypriot economy and the excess liquidity of the banking system.

"But this does not satisfy us, we have to find ways, and there are thoughts, to make this spread smaller for the good of the economy," he said in this regard.

Asked about the progress of the Central Bank Bill, Patsalides said he has not yet seen it due to lack of time, adding that he would like the open governance at the CBC to rise to an even higher level, with proper reporting, proper functioning of the supervisory and the executive board, a strengthened internal auditor, with committees and departments ensuring that governance at the Central Bank of Cyprus does not lag behind other European central banks.

In response to the above questions, the Finance Minister said that his views are in full convergence with those of the Governor of the CBC and define the way they should work together to ensure financial stability in a period of high uncertainty.

Asked whether he considers a reduction of interest rates next June to be possible, Patsalides reiterated that in his opinion the current level of interest rates is at the right level.

He added that in June the ECB will have more data at its disposal and on the basis of this data its position on the course of interest rates will be formed.

"The ECB has not committed to further rate cuts or rate hikes, it has not set a course. It maintains its flexibility, which will depend on the economic data available at that moment," he said.

Asked if he knows about the stage procedures with regard to the upcoming takeover of Hellenic Bank by Eurobank, the Governor of the CBC said that an assessment is being carried out by the relevant ECB bodies, with no timetable for the completion of the procedures so far.

(Source: CNA)