Cyprus Mail

Outflows from co-ops have stopped, Georgiades says (updated)

It appears that deposit outflows from co-op banks have stopped following the government’s action to deposit €2.5bn in the form of bonds, Finance Minister Harris Georgiades said on Thursday.

Speaking after a meeting with the Green party, Georgiades said certain things and decisions were a result of Cyprus operating in a European environment.

“European supervisory demands are strict and specific and to a great extent they define developments,” he said.

Months of rumours about the co-op’s condition and last week’s public invitation by the state to potential investors, triggered deposit outflows and forced the state to intervene in an effort to restore confidence.

On Tuesday, the finance ministry deposited €2.5bn raised from several bonds, worth €2.35, issued to the Cooperative Central Bank (CCB) and from its cash reserves.

Georgiades said the picture before him was that the outflows have been stemmed.

As collateral for the cash the state has received all the co-op’s non-performing loans – around €6.4bn – a number of memberships in private and cooperative companies, and a number of properties in the government-controlled and the Turkish-occupied north, worth over €7.6bn.

The minister said the country’s debt was in theory burdened with an additional €2.35bn but since it was deposited as cash, the net public debt would not rise.

“This amount has not been spent, it has not been used to cover a deficit, but it is deposited. Consequently, there is no effect,” he said.

Cyprus’ debt fell under 100 per cent at the end of last year after the government made an early debt payment of €630m to Central Bank of Cyprus. In absolute terms, total government debt at the end of 2017 was around €18.3bn.

On March 19 the CCB launched a tender for the expression of interest offering two options: acquiring a controlling stake in the bank’s share capital, currently owned by the state, or acquiring assets and liabilities.

The government is working with parties to resolve the NPLs issue, which is plaguing the entire sector.

“Through our responsible decisions I think we can find solutions to benefit the economy and Cypriot society, that will limit negative side-effects and create prospects,” the minister said.

Depending on the investment interest there could be opportunities to make moves such as the creation of an NPL management entity, he added.

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