Co-op unconvinced of ombudsman ruling relieving guarantor


By Stelios Orphanides

Nicholas Hadjiyiannis, chief executive officer of the state-owned Cyprus Cooperative Bank, said on Wednesday that the lender has strong reservations about the recent non-binding ruling of the financial ombudsman which exonerated a guarantor from her obligations.

“We have to be prudent with respect to the rights and obligations of borrowers,” said Hadjiyiannis in a telephone interview.

On December 27, ombudsman Pavlos Ioannou, whose office is tasked with mediating in disputes between borrowers and banks, said that the retroactive provisions of a 2015 law allowed the release of a woman who guaranteed a CYP25,000 (€42,712) loan 26 years ago from her obligations.

Ioannou said that the bank had failed to inform the guarantor that the loan was not performing over the years and after the borrower died, it increased to €365,000. He added that if the bank rejected the ruling, it would have to resort to a court.

“We are going to consider the decision, but we are saddened that these (procedures) are carried out via correspondence and letters leaking (to the press) without facts,” Hadjiyiannis added without elaborating. As a result, he said it would be premature to discuss a probable impact of the ruling on the bank’s earnings and capital.

The decision was first reported by the weekly newspaper Simerini on December 24. The newspaper published part of the ruling concerning the woman, one among five guarantors of the loan. In its ruling the ombudsman’s office applied a provision of the relevant legislation which makes informing the guarantor an obligation for a bank after a loan is in arrears for at least three months or the borrower fails to fulfil any other promise.

The bank is currently working on its listing at the Cyprus Stock Exchange as part of its strategy to attract strategic and institutional investor equity with the gradual issue of shares and so reduce the government’s shareholding to below 25 per cent from currently over 99 per cent.

It was compelled to return €111m to overcharged borrowers after a March 2016 decision of the ombudsman. The co-op, which merged last year with 18 regional co-operative banks it administered, is struggling with a mountain of €6.4bn of non-performing loans, making out more than half of its loan portfolio. The 18 co-operative banks were in turn the ultimate result of successive mergers of hundreds of independent co-operative banks operating in almost every village of Cyprus.

The government recapitalised the co-operative banking sector with €1.5bn in 2014 and a further €175m in 2015.

“The co-op should be the last to blame for being unfair towards our customers,” said Hadjiyiannis adding that “determining policies through publicity is detrimental”.

In the Simerini story, Ioannou said that an unspecified administrator of one unnamed village co-operative bank repeatedly asked patrons of the coffeeshop next door to guarantee loans.

“The number of guarantors involved in co-op loans is huge and the extremely negative socioeconomic consequences of this situation are maximised as a result of the easiness these guarantors can become principal debtors following a court decision via the arbitration procedure applied by the co-op,” Ioannou was quoted as saying.

The Cyprus Business Mail understands that the decision on what action the Cyprus Cooperative Bank will take is not high on the agenda of the bank’s management.


About Author

Stelios Orphanides is a journalist at To contact Stelios Orphanides: [email protected]

  • Barry White

    A first entry into the most hilarious and disingenuous quote of 2018 competition from the Coop.

    “We have to be prudent with respect to the rights and obligations of borrowers,” said Hadjiyiannis in a telephone interview.”

  • Bob Ellis

    I wonder why our banking sector is collapsing ? How many €365,000 loans can you write off before you become insolvent ?

  • Copernicus

    The simple truth is that the Co Op prior to 2013 NEVER looked at the ability to repay a loan. Banking in the villages was based on personal guarantees and the real question is who should have regulated the lending practices of the co ops all those years when anybody could get alone with 5 guarantors. The CEO is right in suggesting that there should not be policy decided by the Financial Ombudsman without checking each case on its merit. The risk is that a lot of borrowers of the Co op wilt pay pig that government will bail them out. The legacy problem is very serious as it affects thousands of guarantors who gave their consent but did not really appreciate that if the borrower walks away they are liable.
    The Co Op has to go all the way and chase the borrower with legal action, bankrupt if they have to and then resort to the guarantors and then may have to take big hair cuts. It is a mess but this is what you get when the co op was run by the wrong people and the governments and regulators did nothing for the vote it would cost. One reaps what he sowed and the government may have to foot the bill!

  • Mist

    25,000CYP was a shed load of money 26 years ago. Why did the bank fail to go after the estate? Does the family now think its home clear? The relationship of the bank to the person who borrowed the money?

  • dave

    ‘ but did not really appreciate that if the borrower walks away they are liable.’


    • I’ve just realised many non performing loans are also guarantors for others, what could possibly go wrong ?

      • Cydee


        • Ok elsewhere guarantors might be vetted for their own debts and ability to repay those they guarantee ?

      • So feasibly i and a friend could guarantee each others loans, then not pay back anything. The bank will approach both guarantors who both have NPL’s guaranteed by each other.

  • “informing the guarantor an obligation for a bank”

    “The bank is currently working on its listing at the Cyprus Stock Exchange as part of its strategy to attract strategic and institutional investor”


    • Cydee

      If ever two statements cancelled each other out…….

  • costaskarseras

    The problems the borrowers and guarantors are facing today are unusual owing to the worldwide economic crisis. The responsibility lies squarely with the EU, in Britain the Thatcher’s policies and the US governments that let loose the ever-hungry beast, the neoliberal policies and removed any safeguards to curtail the bank excesses. Despite the free range the banks were granted they went beyond the pale and were found guilty of criminal dealings. For instance in the UK RBS, staff could boost their bonuses by finding firms which could be squeezed in what it called a “dash for cash” and deliberately caused small businesses to fail and people to lose even their homes.

    • Copernicus

      Mr Karseras, with all due respect the problems in Cyprus are not the product of the world crisis but a crisis of bad governance, bad regulation and governments which did not understand the problem of Cypriot bank exposure to the Greek economy. If they had done their job properly, at bank management and regulatory level, there would be no problem. The blame game, in which Cypriots excel, cannot be used for the bank problems. As the CEO of BoC said banks in Cyprus did not lend well, an Irish understatement!

      • costaskarseras

        The European Union Monetary Affairs Commissioner Olli Rehn told the European Parliament that “at the heart of the Cyprus problem there is an oversized banking sector that has flourished by attracting foreign deposits on very favorable terms. It was the problems in the banks that caused the problems in the public finances and the economic recession in Cyprus, and not the opposite.”

        No one can deny the fact that without the irresponsobility of the private banks, Cyprus would never have faced an economic crisis of these giagantic proportions.

        You are implying that the economic crisis of Cyprus was caused by Mr. Christofias. Who caused the economic crisis in the US, Britain, Italy, Spain, Portugal, Greece, Ireland and even Iceland? Do not tell me that Mr Christofias was also responsible for the tragedy of these people and not the bankers who were declared innocent by DISY.

        This crisis has condemned one-fifth of the UK population to poverty and the worst affected are children and pensioners. Currently 3.7 million children live in poverty in the UK.

        • Copernicus

          I implied nothing of the sort you suggest; the bankers governance was flawed (if you read my words) as well as the regulator (the Central bank) as well as the government for tolerating the lack of oversight of the Co Op. We are not generalising but talking about the Co Op so please stick to the issue of the article. Yes bankers all over the world are to blame for the crisis but in Cyprus the Co Op did not attract deposits from overseas and did not lend in Greece and yet they managed to bankrupt the bank period! Unless you know better about what happened at the Co Op

          • costaskarseras

            The Cypriot banks as almost all banks are privately owned until they get into trouble and then the taxpayers bail them out, are regulated by the Central Bank of Cyprus and not by the government. CBC as all Central Banks in the Eurozone are independent of their national governments and are under the jurisdiction of the European Central Bank and Mr Mario Draghi is its President.

            Why do you ignore the fact that Cypriot banks are not the only banks that went bankrupt?

          • Roger Thecabinboy

            but the coop banks were not privately owned..they were a socialist institution owned by the masses who put money in them. .the fact remains that what happened to the Coop banks was unique to the coop banks and principally involved them being a local trough in which too many trotters were particular if they were connected with bank management. This also happened with the privately owned banks, in particular Laiki under the late but unlamented Vegnopoulos, topped off with taking on Greek Junk, as everyone else dumped it.
            the government of chris toffee *rse simply spent too much and borrowed more than it could pay back, turning government borrowing into an NPL, typical of many imprudent socialist governments.

          • Copernicus

            I do not ignore the fact that the Cypriot banks, due to bad governance, very light supervision and absence of government strict oversight, needed financial support or to be resolved. Even if they they ar private firms they operate under supervision of the Central bank (to ECB). The question is whether the management and central bank did their job for the Co Op and not the other banks. The Co Op operated under what until 2013 was the Co Operative Supervisory framework which was accountable to the Ministry of Commerce and Industry. In fact when it last got into trouble it was bailed to with a subordinated loan from government. pence it really begs the question how a Co Op which took deposits was allowed to escape the real regulatory framework for so long and were the people managing it were fit and proper. As you may know the former boss of Co Op is being taken to court for misappropriation with very long dated loans with hardly any security. So please do limit your comments to the Co Op and to the responsibility of those who oversaw its activities (the Co Op Supervisory under the Ministry Of Commerce); the CBC took over after 2013! Which party supported the status quo before 2013?? Which party wants the Co Op to go back to the status of ownership by its members?

          • costaskarseras

            You continue to ignore the fact that Cypriot banks are not the only banks that went bankrupt, what caused the banks in the UK, US, Ireland and Iceland to collaps? This worldwide crisis has catastrophic effects across all sections of the economies of many countries a lot richer than Cyprus. This man-made crisis has condemned millions of people to poverty and rewarded a small elite not only to continue unabatedly but gave it an oportunity to increase its wealth. To appreciate the extent of the catostrophic effects of the redistribution of wealth from the poor to the rich, please, see below that even the children of rich country like the UK have not been spared from their greed.

            From a packet of the well-known cereal firm Quaker Oats: “At Quaker we want to make a difference. In the UK, over 500 000 children go to school hungry everyday. This can mean that children struggle to concentrate and find it hard to learn in class.” They appeal for donations of £3 to the “Magic Breakfast”.

          • Copernicus

            Please focus on writing about the problems of the Co Op which is the essence of the article and do not go on about the global crisis which had no impact on Co Op as it was lending with no real assessment of repayment ability but with guarantors. This is the issue and who is to blame for the lack of governance, risk management; the simple answer is the institutions and the state which were responsible for supervision. I am afraid if you cannot comprehend this then there is no point in arguing with you about the causes of the world financial crisis. The Co Op took small deposits and lent very badly period!

          • Bemused

            I am afraid he will not answer on the Co-Op only or even mention it.

          • But red costas must face the failings of the socialist co-op. It has been run badly especially the means testing and guarantor system. As this story unfolds no one will be able to defend the shortcomings.

          • Bemused

            Red Costas is not interested in truth/facts about the Socialist Co-Op his mandate is to indoctrinate Cypriot youth with his particular failed Marxist ideology.

            So he posts with out considering any facts put to him by other posts all he wants to get across to the young is the message banks/capitalism/EU/West/ are bad

            He just simply not interested in the Truth and will use deflection on any points put to him.