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Cyprus

Coop owners review progress, decide to meet in two months (Update-1)

The shareholders of the Cooperative Central Bank decided to meet again in two months’ time and take final decisions aiming at speeding up the bank’s stock exchange listing and procedures to improve its financial performance and loan portfolio quality, the bank said.

The shareholders’ meeting “welcomes the introduction of boundaries in the Audit Office’s audit,” which would put the coop banks in a disadvantageous position compared to other licenced credit institutions, the bank said in an emailed statement on Monday after an extra-ordinary meeting in Nicosia.

The shareholders also welcomed “the great progress in the implementation of the restructuring plan and the improvement of the cooperative banking sector’s financial position and asks the board to continue the efforts and speed up procedures,” the statement said.

The decision came less than two weeks after the European Commission allegedly expressed concerns over the bailed-out bank’s course and the state’s interference in its affairs, and three days after parliament decided to curb Audit Office’s competences in auditing the lender.

On Friday, the parliament adopted two proposals, one banning the Audit Office from carrying out financial audits and allow only administrative audits at the bank, which the government bailed out with almost €1.7bn and owns 99 per cent of its shares.

The second piece of legislation, tabled by Disy and passed also with the votes of communist Akel, also restricts access to data required by Auditor General Odysseas Michaelides for auditing purposes. Akel said that it voted in favour of slashing the auditor’s competences by mistake and will propose a new law to restore them.

Finance Minister Harris Georgiades, who was in favour of stripping auditor general Odysseas Michaelides’ auditing powers over the co-ops, said on November 8 that the European Commission’s directorate general for competition demanded a “drastic” change in the bank’s course. The Commission’s warning -conveyed to Cooperative Central Bank and finance ministry officials the day before- came amid a public controversy over whether the auditor general had the right to audit the bank. In defiance of an opinion issued by Attorney General Costas Clerides who backed Michaelides, the bank repeatedly refused to grant the Audit Office access to information it had requested.

Michaelides had previously questioned the speedy procedure which led to the appointment of Nicholas Hadjiyiannis as the bank’s chief executive officer.

The new shareholders’ meeting -to be held in less than two months- will have to take decisions about the bank’s planned listing at the Cyprus Stock Exchange, subsequent actions and timetables, the bank said. The bank, with almost six-tenths of its loan portfolio not performing, plans to attract private investors with the issue of new capital, as provided by Cyprus’s bailout terms. The capital increase will reduce the government’s participation gradually to 25 per cent of the bank’s shares.

“The board of directors will have to do its homework and present available options to the shareholders at the next meeting,” a source with knowledge of the situation said on Tuesday, citing the lack of authorisation to talk to the press about the matter. “Today, the shareholders were informed about the progress and they tasked the bank with coming up with proposals. The bank didn’t have any proposals ready today, hence their was nothing concrete on the table to decide”.

The new meeting will also have to decide on measures and proposals “for further (improving) operational and financial performance,” increase in profitability and reduction of non-performing loans via increased fresh lending, accelerating viable loan restructurings, and more effectively manage non-performing loans, the Cooperative Central Bank said.

The chief executive officer of the bank Nicholas Hadjiyiannis said that the bank overperformed in the past twelve months in achieving its targets, something which “external institutions are confirming”, the bank said.

The bank’s performance includes the generation of organic profitability, which raises its capital ratio to 16 per cent, the pending announcement of profits for a fourth consecutive quarter, progress in addressing bad-loans, maintaining a €4bn excess liquidity from deposits and increase in lending, the bank said citing Hadjiyiannis.

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