Cyprus Mail
Cyprus

Retirement plan for co-ops ahead of mergers (updated)

By George Psyllides

THE CENTRAL Co-operative Bank (CCB) has prepared a voluntary retirement scheme for co-operative banks, as part of a wider plan to restructure the sector, a senior official said on Monday.

CCB general manager said the scheme has been submitted to the Central Bank of Cyprus (CBC) and the finance ministry, but it did not specify any numbers or give any other details.

“We have submitted a voluntary retirement scheme and the matter is now before the finance ministry,” Erotokritos Chlorakiotis said.

According to the terms of the island’s bailout, co-operatives must shrink in number – from about 96 down to around 35 – mainly through mergers.

Their supervision will also shift from the commerce ministry to the CCB.

The CBC will also have a role in the supervision.

Last week,  an independent commission (ICFCBS) on the future of the banking sector that co-ops should merge into a single joint stock entity with commercial management under the direct supervision of the CBC.

Presenting its preliminary report on the banking sector, the ICFCBS, said co-ops were organisations with an exceptionally poor business record and an obsolete structure “that have become quite a cost to the economy”.

Commission chairman David Lascelles said co-ops should have been bailed-in, like Bank of Cyprus was, to cover their capital shortfall.

As part of the bailout agreement, BoC used (uninsured) deposits over €100,000 to recapitalise.

In contrast, a €1.5 billion capital shortfall in co-ops will be covered by the bailout money.

It will be the third time Cypriot taxpayers bailed out co-ops.

They had received 22 million Cyprus pounds in the late 70s and a further 67 million Cyprus pounds in the late 80s.

“We think their day has passed,” Lascelles said of co-ops. “Cyprus is no longer the agrarian economy they were set up to serve 100 years ago.”

He acknowledged however, that the commission’s proposal was radical as co-ops were “liked and politically popular”.

 

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