Finance Minister Harris Georgiades said that Cyprus had no other choice than to accept the European Commission’s conditions when it gave the go ahead for the sale of the Cyprus Cooperative Bank’s to Hellenic Bank, the Cyprus News Agency (CNA) reported on Wednesday.
Georgiades, who was talking to the members of the parliamentary finance committee a day after the cabinet approved a draft bill extending government guarantees to Cyprus Cooperative Bank assets acquired by Hellenic Bank as part of an agreed asset protection scheme, also said that the Commission gave Cyprus a three-month deadline to draft a business plan on the management of the Co-op assets that went to the possession of the government, consisting mainly of €6bn in non-performing loans.
The cabinet will also have to approve at an extra ordinary meeting on Thursday, chaired by the Speaker of the House of Representatives Demetris Syllouris, draft laws modernising the legal and judicial system which will help managing delinquent loans in the banking system, the finance minister said according to the CNA.
On June 19, the European Commission’s competition watchdog linked its approval to Cyprus’s scheme to sell the operations of the Co-op to Hellenic Bank to the condition that Cyprus would reform its legal and judicial system and so reduce non-performing loans in the banking system.
The finance minister said that the draft in question bills will be submitted to the parliament on Friday after being approved by the cabinet, the Cyprus News Agency reported.
The finance minister said that the cabinet had already approved Estia, the government’s scheme to help vulnerable groups with their mortgage repayment, which will be forwarded for approval in Brussels as it involves state-aid, according to the CNA.
Responding to questions by Disy leader Averof Neophytou, who also chairs the finance committee, and Diko leader Nicolas Papadopoulos, Georgiades said that it was not possible to submit only the bill on the state guarantees for the assets transferred to Hellenic without it being accompanied by draft bills on the management of delinquent loans.
The sale of the Co-op’s operations to Hellenic, signed on Monday, was made necessary after the lender made only slow progress in reducing its stock of non-performing loans, which accounted for roughly six tenths of its loan portfolio. Depositor concern over the bank’s capital adequacy prompted depositors to withdraw €2bn in the first quarter from the state-owned lender, recapitalised by the government in 2014 and 2015 with almost €1.7bn.