04.04.2022
An increase in daily Covid-19 infections in Cyprus and heightened uncertainty about the impact on the real economy has led Cypriot banks to tighten corporate lending criteria in the fourth quarter of 2021, according to a bank lending review published by the Central Bank of Cyprus.
CBC said consumer lending criteria remained unchanged, while the expectations of banks participating in the survey suggest that lending criteria will remain unchanged in the first quarter of 2022.
According to the CBC, the factors that led to the tightening of the criteria for lending to Cypriot businesses, both large and small and medium-sized corporations, were the banks’ perception of risk compared to the prospects of certain sectors of the economy, their general economic condition and reduced risk tolerance.
“The change (in lending criteria) may be due to the increase in Covid-19 cases due to the Omicron variant and its rapid spread among the population, which increases uncertainty about its impact on the real economy,” CBC added, noting that this change contrary to the expectations of the participating banks in the previous quarter.
The survey recorded a net increase in demand for corporate loans in the fourth quarter of 2021, demand associated with the creation of reserves, working capital and investments in fixed assets, the demand for which has been growing for the second quarter in a row.In addition, the CBC said that the increase in reserve and working capital financing needs could be due to rising commodity and other product prices due to disruption to the supply chain in international trade and significant increases in transportation costs.
According to the survey, the criteria for lending, both for the purchase of housing and for consumer loans, remained unchanged.
Demand for home loans recorded significant growth in the fourth quarter of 2021, exceeding bank expectations. The CBC added that the increase in demand was mainly due to two government home loan schemes that ended in December 2021.
Moreover, demand for consumer and other loans remained unchanged for the second quarter in a row in the fourth quarter, contrary to the expectations of participating banks in the previous quarter.
