Finance Minister says no to a state-owned bad bank

Cyprus Minister of Finance Harris Georgiades voiced its disagreement over setting up a state-owned asset management company (AMC or bad bank) that would acquire and manage distressed loans, as this would most probably entail possible capital shortfalls for the banks due to EU state aid rules.

In a letter replying to Environmentalists and Ecologists Movement MP Yiorgos Perdikes said in case Cyprus decides to set up a state-owned AMC this should comply with EU state-aid rules, sparking a lengthy discussions with the EU DG Competition, as in the case of Italy.

He pointed out EU prohibits the use of tax-payer money to cover banking losses, which means acquiring bad loans in book value.

Source: Cyprus News Agency.