Cyprus Mail

NPLs and run on deposits helped bring down Co-op, probe hears

Dionysis Dionysiou, a senior finance ministry official (Christos Theodorides)

The delay in dealing with non-performing loans and the run on deposits are the main reasons that caused the collapse of the co-op bank, which also had corporate governance problems, a senior official told an inquiry on Thursday.

Dionysis Dionysiou, a senior finance ministry official who represented the state at the co-op bank, said the biggest mistake was the delay in deciding to outsource management of the mountain of NPLs the co-op had.

Dionysiou, who appeared before the three-member panel for the third time, said there were always other matters that caused delays, but there were also legal issues.

The biggest problem relating to corporate governance stemmed from the bank’s structure since it was made up by 18 independent entities and a board that could not make decisions.

The decision to merge the co-operative central bank with the 18 separate savings banks was taken in December 2016, three years after the sector was bailed out and nationalised with almost €1.7bn in taxpayers’ money.

Initially there were 93 co-operative savings banks, which merged into 18 in 2014.

In the summer of 2017 the merger was still not completed. Their database was unified in February this year, around a month before it was hastily put under the hammer.

Another delay was the need to amend the law to enable the transfer of personnel from the savings banks to the central bank.

“We spent six months in parliament for this,” Dionysiou said.

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