Cyprus Mail
Business Cyprus

Government to address Co-op depositor concerns (updated)

While the finance minister promised action to reassure Cyprus Cooperative Bank depositors who fear they could suffer losses in a possible bail-in, as the lender enters negotiations with investors, the leader of Akel publicly sowed doubts about the security of deposits before seeking to play down his comments later on.

“The state has the financial capacity and political will and is at the stage of carrying out additional moves in the next days that will safeguard depositors in a definitive and irrevocable way,” finance minister Harris Georgiades told state radio CyBC on Friday. “A decisive step is imminent which will have both symbolism and substance. Even those concerned that something might go wrong will see that the state is showing the way”.

“I am talking about tomorrow, the day after tomorrow, about a step that will run parallel” to the current procedure which could lead to the acquisition of the entire bank by an investor, the minister said.

Georgiades assured depositors that their deposits were safe.

“There is no concern for any deposit, provided that things proceed the way planned,” he said. “It is a controlled (and) credible procedure which aims at securing depositors”.

“Things will change as other things changed in our country over the past years,” the finance minister added. “But every time we dared to take a step towards change, the impact was positive”.

The Cyprus Cooperative Bank, which struggles with a €6.5bn mountain of non-performing loans, roughly half of its loan portfolio, received €1.7bn in taxpayers’ money in the form of two successive capital injections in 2014 and 2015.

The bank, the result of a merger of hundreds of savings banks scattered across the island is facing the prospect of further increasing its provisions for loan impairments, which could wipe out much of its remaining equity.

An expression of interest procedure completed on Thursday showed that there is interest from at least two strategic investors to buy out the lender and two or more financial investors to acquire a stake or assets. In September, the bank had almost €12bn in customer deposits.

Minutes later, Kyprianou also told the CyBC radio that he had doubts whether deposits, even those below €100,000, the amount guaranteed by the government, were safe and would not be affected in a possible repetition of the 2013 bail-in.

Then, depositors at Bank of Cyprus saw almost half of their deposits in excess of €100,000 converted into equity while those at Laiki lost all their uninsured deposits.

“He should remember this and the decisions about the Co-op after May,” said Kyprianou in response to the finance minister’s comments.

The minister should remember that “the first €100,000 are safe and that there will be no interference because this government made many promises to the Cypriot people which it easily forgot,” Kyprianou, whose party traditionally opposes economic reforms, including privatisations and stricter foreclosure laws, added. “If there is someone who has caused problems to the Co-op, that is not Akel. It is those who are administrating and have made sure to bring it to today’s condition”.

“People ask me whether the €100,000 are safe,” the opposition politician continued. “I say that I cannot guarantee that, but the finance minister has said publicly that they are. I wish and hope that he is right”.

Hours later, Kyprianou denied that Aκel was behind rumours encouraging depositors to withdraw their funds from the Co-op.

“The small amount I have together with my spouse is deposited at the Co-op and I never withdrew it,” he said.

On Thursday, an executive of the Co-op said that there had been cash withdrawals in recent days after the bank announced its intention to seek private investors.

“I honestly wonder why these rumours are circulating,” Kyprianou said. “They are unacceptable, condemnable and Akel has never acted this way”.

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