The new Governor of the Central Bank of Cyprus, Dr. Christodoulos Patsalides, called on banks yesterday to demonstrate high social sensitivity by considering the risk to their reputation.

As he pointed out, "Reputation risk has many sources, and one such source is public dissatisfaction," while emphasizing that "this cannot be ignored. You have an obligation to consider all risks, and public dissatisfaction can lead to undesirable outcomes."

Dr. Patsalides stated that the Central Bank of Cyprus has urged banks, in their actions, transactions with customers, charges, and pricing, to adopt a better and more comprehensive strategy that takes social sensitivities into account.

In his speech, during the presentation of the role and responsibilities of the CBC, and referring to the issue of interest rates, Mr. Patsalides mentioned that "we see the gap between deposit and lending rates narrowing, albeit slowly, but moving in the right direction."

He also mentioned that "Cyprus is a small economy and often experiences imbalances or reaches equilibrium slowly," indicating that "as a result, lending rates rise rapidly while deposit rates rise slowly."

"This," he explained, "is not only observed in interest rates but in everything." "Cyprus is a small economy, and prices do not adjust as quickly as they would, for example, in Europe. Moreover, there are distortions," he pointed out.

The new Governor addressed many issues related to the role and responsibilities of the CBC.

First, he disagrees with the intention of political parties to impose a windfall tax on banks' unexpected profits as well as a special levy on assets, warning that it would cause more harm than benefit.

Second, he believes that such ad hoc and emergency taxes cause side effects in the economy without offering solutions, emphasizing that "any tax reform must be predictable and the result of a comprehensive study."

Additionally, in response to a related question, he mentioned that "the NPLs of credit acquisition companies, amounting to 21.5 billion euros, are indeed a burden for the economy but do not affect its growth." "Credit acquisition companies have assets and real estate, which are for sale in the market and could potentially pressure property prices," he continued.

The Governor of the Central Bank, Dr. Christakis Patsalides, speaking at his first press conference to the media after assuming his duties, revealed that "applications from financial institutions for banking licenses are pending before the CBC." He emphasized, however, that all applications are evaluated under the strict rules and criteria imposed by supervisory authorities in Frankfurt, without going into details. He limited himself to saying that the CBC is open to attracting serious and reliable foreign banks.

On this point, he was asked to comment on the upcoming public proposal for the full control of Hellenic Bank by Eurobank, noting that the CBC, as the competent supervisory authority, supported the acquisition process.