The committee probing the failure of the Co-op continued on Wednesday with the testimonies of two more witnesses, a former executive who lay the blame on the bank’s management and a former board member who pointed his finger at the Central Bank of Cyprus, the Cyprus News Agency reported.
Efthymios Pantazis, the Co-op’s former head of the banking operations division, told the committee that the bank, the product of successive mergers of initially more than three hundred independent local co-operative saving companies, was unable to exercise effective control over its local co-operatives before 2013.
On top of that, members of local boards were poorly qualified and lacked special skills or knowledge in finance. This was reflected in the quality of loans extended before the Co-op’s restructuring, Pantazis said.
Between 2008 and 2013, there was no compliance by local co-operatives with measures issued by the Central Co-operative Bank, which administered the independent co-operatives and served as their lender of last resort, as they were conflicting with the competences of the Authority for Supervision and Development of Co-operative Societies (ASDCS), he added.
The ASDCS was supervising co-operative societies until 2013 before the Central Bank of Cyprus assumed responsibility for the supervision of the sector. The Central Co-operative Bank, which was recapitalised with €1.7bn in taxpayers’ money in 2014 and 2015, was renamed Cyprus Co-operative Bank in 2017, after it completed a merger with the 18 remaining cooperative saving banks.
The second witness to testify on Wedneday, Pavlos Theodotou, said that he considered former Central Bank of Cyprus governor Athanasios Orphanides responsible for the failure of the Co-op.
The bank was compelled into agreeing to sell its operations to Hellenic Bank in June, after failure to reduce its non-performing loans stock wiped out its capital. Orphanides served as governor between 2007 and 2012 and was replaced by Panicos Demetriades, the darling of former communist president Demetris Christofias.
Both Christofias and his party Akel opposed subjecting the Co-op to the supervision of the central bank. The decision to dissolve the ASDCS and place the co-ops under central bank supervision was part of Cyprus’ bailout terms signed with international creditors in 2013.
Theodotou, who served as board member from 2007 until 2012 and was also general director of the Co-operative Federation, added that he disagreed with the decision to dilute the stake of the previous Co-op owners to 1 per cent after the bank was bailed out, on the grounds that it owned large immovable property.
The former board member said that that there was an attempt to transform the Co-op into a new Laiki Bank by hiring many of its former staffers whom he described as the “children of those appointed at the helm of the Central Co-operative Bank”.
If the bank was given more time to address its non-performing loans, the situation today would be better, he added.