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Minister can’t guarantee co-ops will not need more cash

By Stefanos Evripidou

FINANCE MINISTER Harris Georgiades yesterday refused to provide written guarantees that the Co-operative Movement would not require further assistance beyond the €1.5 billion earmarked by the state to keep it afloat.

The House Finance Committee convened yesterday to discuss four draft bills concerning the co-operative movement expected to be approved by cabinet today. Parliament’s approval of the four bills plus another ten in next week’s plenary session is considered a prerequisite to getting approval by the Eurogroup on September 13 for the disbursement of the next tranche of bailout money, specifically €1.5 billion earmarked for the recapitalisation of the co-operative banks.

The state has pledged to buy €1.5 billion worth of shares in the co-ops, effectively becoming their sole owner, in the hope that eventually, the co-ops can buy back the shares with a 10.0 per cent interest, or else the state recoups its investment by selling its shares to the private sector.

Central Bank (CBC) governor Panicos Demetriades told the committee yesterday that the co-ops needed around €1.4bn to recapitalise, while the remaining €100m will be used as a buffer in case the banks’ capital needs end up being more extreme than the extreme scenarios estimated by investment firm Pimco.

DISY leader Averof Neophytou asked Demetriades and Georgiades to provide in writing assurances that the co-ops won’t need additional help beyond the €1.5bn state injection.

Georgiades refused, saying: “It is not with words that we can ensure this, but with the very careful management of developments to ensure that what happened with Laiki will not be repeated.”

He added: “The risks are there.”

The minister noted that the draft bills under discussion included significant amendments which would strengthen the supervision and operation of the co-operatives, in the hope that previous bad practices would not be repeated.

He also highlighted importance of putting the right people in charge, “with a clear agenda and clean hands but also the right qualifications, knowledge and experience to take on the management and administration of the co-operatives”.

Georgiades said state ownership of banks was a “paradoxical and very worrying development”. He added: “We are not here by choice but by urgent need.”

Demetriades said the series of bills awaiting parliamentary approval was “a big step” towards improving corporate governance in the banking system and co-operative movement.

“The fact that no member of a board of directors of any bank or credit institution can borrow over €500,000 means that the phenomenon of the past cannot be repeated,” he said.

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