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Attorney-general to launch in-depth probe into Co-op’s demise

Attorney-general Costas Clerides

Attorney-General Costas Clerides said on Wednesday he would be launching a probe into the possibility of wrongdoing at the Co-operative bank and would be appointing an investigative committee to carry out the task.

The investigation will look into how the lender’s non-performing loans amounted to €7.5bn as well as why Co-op required €1.5bn in recapitalisation from the state in 2014.

It also aims to provide insights into the way the lender was managed as well as all the decisions that led to its eventual sale to Hellenic Bank.

Clerides announced his decision before President Nicos Anastasiades convened the cabinet where they decided to request the AG carry out the investigation.

In statements to reporters outside the presidential palace, government spokesman Prodromos Prodromou said Clerides was acting within his remit as it fell completely under his responsibility to appoint the committee.

Anastasiades, however, requested that due to the nature of the investigation and in a bid to ensure its transparency, foreign experts should be used.

He also asked Clerides to appoint an investigative committee to look into the scope of the Co-operative credit institutions, the Central Co-operative Bank and the Co-operative Bank of Cyprus.

The findings should include the reasons why the Co-op remained outside the Central Bank of Cyprus’ oversight even after the island joined the EU despite the opposing views and consequences of the decision.

Another crucial question is why and how the Co-op was led to need €1.5bn as recapitalisation from the state in 2014 and how non-performing loans amounted to €7.49bn through its operations.

According to Prodromou, the president has also requested the investigation looks into whether any of the non-performing loans belong to any ‘politically exposed persons’ or members of the board and management of Co-op.

A key element of the findings should also be an insight into the overall management and potential political interferences in the way Co-op institutions were run.

Asked which period of time the investigation would focus on, Prodromou said the timeframe was irrelevant.

“The practices which led us to have €7.5bn in non-performing loans must be investigated.”

Opposition parties have been crying foul over the sale of the Co-op bank to Hellenic, suggesting that the deal was to the private lender’s advantage, leaving taxpayers with the bill. Akel earlier this week asked the AG to investigate the possibility of wrongdoing

Commenting on Akel’s comments, Prodromou suggested a better idea would be if any of the political parties submitted a question to parliament to find out who gave non-performing loans to who and how, that lead them to amount to €7.5bn.

“When this was taking place will be revealed through the investigation.”

Additionally, anyone who had any other solutions on how to tackle the non-performing loans would be welcome to suggest it, Prodromou told reporters.

As part of the deal between Hellenic Bank and Co-op, which was approved by cabinet on Friday, Hellenic will be subject to a capital raise and will undertake payment of the Co-op’s total deposits, amounting to €9.7 bn.

Hellenic will also take on €10.3bn the lender’s assets consisting of performing loans, bonds and cash, plus around €500m in non-performing loans. Assets worth approximately €8.3bn will be transferred to the state.

About 1,100 of Co-op’s 2,650 staff will go to Hellenic while another 900 will have to retire through a voluntary retirement scheme.

The rest, he said, will continue to work for the body that will remain in place after the deal to administer the bank’s non-performing loan portfolio, which accounts for roughly six tenths of the total.

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