The borrowers’ turn to foreign currencies has brought noticeable changes in the Cyprus’ credit sector, with the Cooperatives losing ground against the commercial banks. Turning to account the advantage that they have in the loans in foreign currency against the Cooperatives, the banks managed to increase their share in the market of £14 billion. According to latest figures, the Coops have lost 1.8% to 25.7% against 27.5% in May 2005.

Borrowing in foreign currency at £1.98 billion

In May 2006, the borrowing in foreign currency stood at £1.98 billion (1 in 7 pounds). It is noted that the Coops grant loans in Cyprus pound only.

According to the latest Central Bank Monetary Review figures, the loans in foreign currency in May have recorded a sharp increase of 44.5% to £1.98 billion against £1.37 billion in the corresponding month of 2005.

Same figures reveal that the Cooperatives’ credit growth in the same month dropped to 8.4% against 10.8% in 2005. On the other hand, the commercial banks’ credit growth surged from 5.7% to 11.1% in May 2005.

Conversion of housing loans into currency

The reclassifications in the sector are attributable to the housing loans, which were “a powerful weapon” for the Cooperatives until recently. “The commercial banks convert the housing loans into foreign currency to become more attractive. This enables them to increase their share in the market”, Strovolos Coop General Secretary, Demetris Stavrou said, on the question concerning the losses that Coops suffer in the sector of loans.

It is worth noting that a recent Central Bank announcement attempted to discourage borrowers from borrowing in foreign currency.

Reversal of climate

Mr. Stavrou, however, appeared optimistic for the future stressing that things will change to the benefit of the Cooperatives. “The harmonization of the Coops with the Community Acquis by 2007 will change the current condition and loans will be granted “on equal terms”, he concluded.