Cyprus Mail
Business Cyprus

Co-op stats reveal huge extent of non-performing loans

By George Psyllides

NON-PERFORMING loans (NPLs) in some small co-operative banks are so high that in one case they have reached 88 per cent, Central Bank (CBC) data showed yesterday as parliament discussed the procedure of consolidating the sector, which taxpayers will have to bail out to the tune of €1.5 billion.

A confidential CBC document circulated in the House Commerce Committee showed that NPLs in quite a few smaller units, which will now be absorbed by bigger entities, were extremely high.

The Polemi co-op in Paphos for instance reported 88 per cent NPLs. The unit’s total lending was €24 million.

The Trachoni co-op in Limassol reported 82 per cent NPLs on a total of €50 million, Pomos, Paphos, showed 81 per cent of €70 million were non-performing, and the Krasohoria unit in Limassol said 77 per cent of €60 million were NPLs.

The head of the Central Co-operative Bank (CCB) Erotocritos Chlorakiotis admitted that small co-ops must go.
“It was prudent and wise when local societies created these tiny co-operative companies; in my view it was imprudent, anachronistic, and unwise for these tiny companies to continue to exist in today’s conditions,” Chlorakiotis said.

The island’s 93 co-operative companies will be merged to form 18 entities in line with Cyprus’ bailout terms.
Supervision will move to the CBC.

Ten will be based in the Nicosia district, three each in Limassol and Larnaca, and one each in Paphos and Famagusta.

They will receive €1.5 billion in taxpayer money to recapitalise.

Chlorakiotis said this was the way for the sector to move to the future “with upgraded services, structure and wiser decisions.”

To be eligible for the bailout, the government must prepare and put through parliament a total of 14 pieces of legislation before September 13.

Finance Minister Harris Georgiades said the government aimed to approve the bills “perhaps on August 28” and send them to parliament the same day.

He warned MPs that the bills had to be approved for Cyprus to receive the next bailout tranche.

Otherwise, the co-operative sector could also face resolution, Georgiades said.

To receive a much-needed €10 billion bailout, Cyprus had to agree to wind down Laiki Bank, its second-biggest, and recapitalise Bank of Cyprus using its depositors’ cash – a process known as bail-in.

Bailing out the co-ops will make the state their exclusive owner with 99 per cent of its shares.

“It is not a loan, no interest is paid and there is no guaranteed return,” the minister said.

The state will receive a dividend on profits and be burdened with losses, Georgiades said.

Many fear that co-ops will eventually fall in private hands.

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Source: Cyprus News Agency


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