The new financing instrument aims to mitigate transaction and systemic risks of foreign banks interested in developing trade flows with Cyprus, and favouring an export-led recovery promoted, in particular, by SMEs and mid-caps. The EIB will provide guarantees to the commercial banks for trade financing, which are expected to support a volume of transactions in the order of €300 million to €450 million per year. “The €150 million Trade Finance Facility for Cyprus that our board has recently approved will re-activate credit lines with international banks and support short term trade-related instruments,” EIB President Werner Hoyer said in Nicosia. “It is meant to maintain the capacity of the Cypriot banking sector to provide a sufficient volume of products such as ‘letters of credit’ despite the deterioration of their credit rating.”
The instrument was first implemented in Greece five months ago, recording positive results. “It addresses a precise and very acute market gap, for an economy whose banking sector needs support in order to maintain the financing of basic trade products,” Hoyer said. The EIB president said more support for Cyprus was on the way. Hoyer said the bank was in the process of finalising an additional tailor-made product to support the island’s small to medium-sized enterprises. The product, developed in cooperation with the government, aims to cover investment and working capital needs of SMEs.
The EIB will finance the fund through a loan to the Republic with the day-to-day management of the scheme entrusted to the EIB’s daughter company, the European Investment Fund. “Of course, new initiatives are more laborious and a learning process for all those involved; but I can assure you that the EIB aims to put the instrument in place by the end of the year,” Hoyer said. In the past five years, the EIB has financed projects worth €1.3 billion in Cyprus. Approximately 80% of this amount went to the strategic areas of energy, environment, transport and SMEs.
Source: Cyprus Mail