By Angelos Anastasiou
THE bailout of co-operative credit institutions (CCIs) with €1.5 billion in troika loans was sealed on Friday with the signing of the recapitalisation agreement between the finance ministry, the Co-operative Central Bank (CCB) and the European Stability Mechanism (ESM).
Finance Minister Harris Georgiades, CCB president Nicolas Hadjiyiannis and executive director Marios Clerides signed the agreement, along with representatives of the ESM.
Following severe banking and fiscal crises last March, Cyprus was forced to agree to the terms of a €10 billion bailout loan by the troika (the European Commission, the European Central Bank and the International Monetary Fund), which included a €1.5 billion recapitalisation package for the co-ops in exchange for their consolidation and restructuring.
Speaking after the signing, Georgiades exalted the prospects of fully recapitalised CCIs to drive the country’s economic recovery.
“The signing marks the stabilisation of the co-ops which, coupled with the fact that their restructuring is also underway, allows us the certainty that they will become a major pillar in the effort to restart Cyprus’s economy”, he said.
Clerides said that the government had fulfilled its obligations, and the responsibility to step up now fell on the co-ops’ management.
“The ball is in our court now,” he said. “We must prove worthy of the government’s trust.”
Earlier on Friday, Hadjiyiannis had explained that once the agreement was signed, the €1.5 billion “essentially got introduced to the CCIs’ balance sheet in the form of available cash, facilitating their recapitalisation by the new shareholder, which is the government.”
“The recapitalisation locks the restructuring plan in place and the CCB can move ahead with implementing it, while fully securing deposits totalling roughly €13 billion”, he added.
The finalisation of the deal heralded a new era for the co-ops, which is poised to start offering loan facilities to cover domestic needs, as well as niche cases like green loans, certain categories of housing loans and credit for businesses employing up to five employees.
“This is our strategy and we want to follow it, and by the end of March we should be able to proceed,” Hadjiyiannis said.
Asked to comment on the issue of persistently high interest rates, he said that they related to the issue of non-performing loans.
“We are trying to think of outside-the-box ways of helping our consistent and viable customers,” he said.
In addition to NPLs Hadjiyiannis cited two immediate challenges facing the organisation, namely passing the European Banking Authority’s stress tests next fall, as well as the organisation’s consolidation.
“The restructuring plan called for full functionality by the coming June, but we aim to be fully functional much sooner,” he said.
A voluntary retirement scheme – part of the restructuring plan – is in “the right path”, according to Hadjiyiannis, who added that a clearer picture should be available by the end of March.
Meanwhile, reports surfacing on Friday linking the rejection of the privatisation bill by the House to the co-ops recapitalisation effort were met with Hadjiyiannis’s vehement denial.
“The decision to recapitalise the co-ops has already been approved by the Eurogroup and the €1.5 billion bond, already deposited in the Central Bank of Cyprus, will be incorporated into the co-ops’ balance sheet upon signing the agreement with the ESM,” he said.
“The recapitalisation has nothing to do with the rejection of the privatisation bill, and any reports stating otherwise are groundless.”