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Cyprus

End of an era for the co-ops

Erotokritos Cholarkiotis, head of the Co-operative Central Bank

By George Psyllides

THE co-operative movement pledged to regain ownership of its banks within a reasonable time following their nationalisation, the head of the Co-operative Central Bank (CCB) said yesterday.

Erotokritos Chlorakiotis said the love of the public and the confidence shown by depositors would help co-ops repay the €1.5 billion in state aid to regain ownership.

“With proper management and practices … it will be possible for co-ops to regain their shares within a reasonable time,” he told the CCB’s 44th AGM, the last one under the current structure.

The state will fund co-operatives with €1.5 billion, effectively making it its sole owner with a 99 per cent share.

The cash is part of the island’s €10 billion international bailout.

Co-ops will have to pay the state 10 per cent annually as interest on the capital held by the government.

Economists do not expect the movement to be able to buy back its shares.

Co-ops will also undergo radical restructuring that will see the number of credit institutions cut from 93 to 18.

Around 25 per cent of the sector’s 410 branches will close.

Co-op officials have disputed the amount needed for recapitalisation, which was the result of an audit of the portfolios.

They have also played down the extent of the sector’s non-performing loans (NPLs). Chlorakiotis said the majority of the loans were small and there was sufficient collateral to cover them.

NPLs were not were not “dead loans” he said, and a lot could return to normal servicing if restructured.

Chlorakiotis said a lot of NPLs concerned loans, which are serviced but had been charged with extra expenses such as insurance and evaluation costs, which had not been included in the initial installment.

He expressed certainty that the situation would improve given the impending mergers, the restructuring of individual co-op banks, and the reinforcement of the CCB’s role.

Cholrakiotis said they were not under any illusions regarding the difficulties of buying back the shares.

“Despite this we are optimistic and base our optimism on the restructuring measures that will be put in place and will bolster our profit potential; on better management of our loan portfolio, and the structural changes that will reinforce the co-op’s operation and tackle weaknesses of the past,” Chlorakiotis said.

The CCB reported a net profit of €52.7 million in 2012 compared with a €37.6 million loss in 2011.



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