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Business Cyprus

State-aid Commissioner kept in the dark over Co-op

Theophanis Theophanou (Photo Christos Theodorides)

State-aid Commissioner Theophanis Theophanous said on Tuesday that his agency was kept in the dark both about the government’s intention to donate a quarter of the Co-op’s stock to its customers and its decision to issue bonds in favour of the failed state-owned lender earlier this year.

Also, Argyro Prokopiou, a former Central Bank of Cyprus official, and Doros Kakoullis of the Authority for Supervision and Development of Cooperative Societies (ASDCS) which supervised cooperatives until 2013, said the bank into which taxpayers injected €1.7bn in 2014 and 2015 was recapitalised based on the assumption that it would have gone ahead with foreclosures to reduce its non-performing loans over the past five years, which it ultimately did not do, the Cyprus News Agency (CNA) reported.

All three were witnesses at the committee set up by Attorney-general Costas Clerides to investigate the reasons that led to the failure of the bank.

The decision to support the bank with the issue of bonds before the Cyprus Cooperative Bank agreed to sell its operations to Hellenic Bank was in violation of legislation, Theophanous told the committee appointed by Attorney-general Costas Clerides to investigate the causes that led to the Co-op’s demise.

“We may have been a bothersome institution,” Theophanous said, but he said finance ministry officials reassured him that the European Commission’s competition watchdog did not raise any issue about illegal state-aid.

Theophanous said that while he expected to be at least consulted he had to contact the secretary of the council of ministers, on June 14, 2017, to inquire about the intended stock donation after reading related press reports adding that it was against Cyprus’ commitments to the European Commission.

The State-aid Commissioner added that he got a response from the permanent secretary of the finance ministry on June 30, 2017, who informed him that existing commitments had been taken into account and that communication with the European Commission showed that the donation of a quarter of the Co-op’s stock was not state aid.

Theophanous said that he repeated his concerns in writing on two more occasions to the permanent secretary of the ministry and his request for additional information remained unanswered.

When the agency under Auditor-general Odysseas Michaelides collected documents from the Finance Ministry in late August 2017 an email of a European (Commission) official was found which referred to a verbal communication with the ministry saying that that particular move would not constitute state aid and would be in line with Cyprus’ commitments.

Theophanous said that two European Commission officials told him in a telephone conversation on September 8 last year that they saw no problem with the government’s intention to give away the bank’s stock but they did not inform him in writing about this when he asked them to do so.

Lastly, Theophanous said when he asked the finance ministry to inform him about the government’s decision to issue bonds in favour of the Co-op, two finance ministry officialsdeclined his request citing confidentiality.

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