The Cooperative Credit Institutions in Cyprus will operate as a unified banking group, President of the Central Cooperative Bank (CCB) Committee Nicolas Hadjiyiannis has said.
Along with the island`s banking system, Cyprus Coops came at the brink of collapse last March when the government agreed with the Troika (European Commission, European Central Bank and the IMF) on a €10 billion bailout. The government granted €1.5 billion capital injection to cover the Coops` estimated capital shortfall acquiring 99% of its share capital. The Coops will enter into a restructuring process, which will see the 94 Cooperative Credit Institutions reduced to 18 under the CCB.
Hadjiyiannis presented Tuesday the road map with the key actions in the next three months as requested by the Troika, which covers the appointment of a new Executive Director, bolstering independence and qualifications of the CCI boards, retaining its customers, containing asset deterioration and to prepare the transfer of Non performing loans to specialized units within the cooperative sector.
“Essentially the cooperative credit sector will operate as a single banking group,” he said adding that following the conclusion of its restructuring, the CCB will operate as a holding company with 18 associated CCIs,” he said.
Hadjiyiannis underlined that the Coops will focus on recovering non performing loans, which stand at 40% of their loan portfolio totaling €13 billion and will set up a central unit to manage loans in arrears.
“Loans that were given should be repaid; they have not just been given away,” he said.
He noted that the Coops do not have exposure to large corporate loans as is the case in island`s commercial banks, but it has granted loans in the retail sector and loans to small medium sized companies.
Hadjiyiannis called on borrowers who are in a position to repay their loans to start paying them, adding that the Coops will reach a settlement with trouble borrowers. He noted that the Coops will recognize losses from non viable loans.
With regard to property repossessions, he said the Coops will show sensitivity on property seizures. “Repossessions is the last step in a non-performing loan. Our goal is not to proceed with individual repossessions but at the same time we own it to the country to take all the necessary steps to secure the interests of the cooperative sector,” he said, adding that “we will do what the correct baking practice entails with sensitivity.”
Furthermore, Hadjiyiannis said that the Coops will proceed with a salary reduction of 15% as prescribed by the restructuring plan and a targeted voluntary retirement scheme.
The €1.5 billion capital injection has already been disbursed by the Troika in the form of a bond and has been currently deposited in a Cyprus Central Bank account and will be granted to the Coops following the approval of the sector`s restructuring plan at the end of January by the European Commission’s Directorate General on Competition.
Hadjiyiannis said the Coops will use the bond to acquire additional liquidity from the European Central Bank.