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Co-op’s last CEO says Europe was worried about state links

Former CEO Nicolas Hadjiyiannis testifying last week before the co-op inquiry

European bank supervisors used the co-op bank to put pressure on the government on matters like the foreclosure legislation, former CEO Nicolas Hadjiyiannis told an inquiry on Wednesday, the second consecutive day he appeared before the panel probing the lender’s collapse.

Hadjiyiannis was responding to a question regarding political interference in the Cooperative Central Bank, nationalised in 2013, and whether European supervisors, the single supervisory mechanism (SSM) had expressed concern.

The former CEO said Europeans were concerned over the co-op bank’s connection to the state because it was also the object of political squabbling. This could only have been solved through privatisation and the CCB was ready for that in the first half of 2017.

Hadjiyiannis said the lender was bound to have governance problems since it was starting from zero but it appeared the SSM were allergic to it being a state entity. However, being a state bank was a way of exercising pressure on the state on broader issues like the foreclosures, he added.

The co-op sector was recapitalised with some €1.7bn following the island’s bailout in 2013. It came close to the brink of collapse early in 2018 before certain parts were sold to Hellenic Bank while over €6bn in non-performing loans were moved to an asset management company.

Hadjiyiannis said the CCB was adequately capitalised in June 2017, with high liquidity and NPL provisions.

However, he said, the parameters of calculating provisions changed in the next nine months and supervisors asked for around €800m in provisions based on an audit.

He said the bank had passed the stress tests but they changed the parameters, eliminating the value of the collateral linked with primary residencies.

The move was linked to the banks’ inability to move on collateral due to the weak legal framework passed by parliament.

The European Commission made the approval of the sale of the co-op to Hellenic conditional to Cyprus making its foreclosure and insolvency framework more effective.

Hadjiyiannis will appear before the panel again on Thursday.

 

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