Government tries to allay fears of co-op customers
By Elias Hazou
The government on Monday said it was moving to shore up confidence in the Cyprus Cooperative Bank (CCB) as depositors pulled more money out of the lender.
Neither the government nor the state-owned bank would be drawn on what these moves might be, though the goal was clear: to buttress the bank’s deposit base so that potential private investors would not get cold feet.
Queues formed in co-op branches as worried customers withdrew their deposits amid news of government plans to privatise the lender, whose balance sheet is stacked heavy with delinquent loans.
Speaking on the Alpha television channel, government spokesman Prodromos Prodromou asserted that the state has the ability to support the co-op banking sector, nationalised and consolidated in 2014.
“The Cypriot state of 2018 is not the same as it was back in 2012,” he said, alluding to the lead-up to the 2013 financial meltdown.
But he declined to say what actions the government had in mind.
It was unfortunate, Prodromou added, that turmoil was being created within Cyprus at a time when the government was seeking to attract investment into the bank.
According to media reports, the government was mulling one of two options: either to divert to the co-op bank some of its cash holdings held with the Central Bank, or to issue a sovereign bond and then deposit the money raised into the co-op.
Either way, the ‘move’ could materialise either on Monday or Tuesday, a senior co-op official told the state broadcaster.
Some media outlets reported that the government was looking to raise up to €2bn.
Last month the co-op bank opened a virtual data room to be used by potential investors to securely exchange data and analyses, as the lender seeks to reduce the state’s share.
The process launched by the bank has two parts, one offering the choice of acquiring the bank as a licensed entity, or part or all of its assets and liabilities.
The process closed on March 29. Potential investors are to be given time to submit binding offers, with the month of May now being cited as the end of the process after the move was deemed a success by the level of interest shown by investors. .
The co-op bank was recapitalised with €1.67bn in taxpayer money in 2014 and 2015, but it is struggling with some €6.4bn in non-performing loans (NPLs), accounting for more than half of its loan portfolio.
Yiannis Stavrinides, head of the bank’s Strategy and Communications Service, said the lender would be making it harder for customers to break certificates of deposit, as it emerged that several depositors were scrambling to cash out.
He said the bank has reminded staff that CDs with a fixed maturity cannot be broken. Exceptions would be made only in certain cases, such as where people can demonstrate they need the money to pay for healthcare bills.
Seeking to assuage customers’ concerns, Stavrinides said the co-op bank would emerge stronger from the privatisation process initiated by the government.