AG asked cabinet to reconsider Co-op stock donation, auditor says

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By Stelios Orphanides

The Auditor-general’s office said that it asked for the revocation of the cabinet’s May 2017 decision to donate a quarter of a state-owned bank stock to its customers.

“We proposed that the Finance Minister submits with no delay a proposal to the council of ministers for the cancellation of its decision to donate shares as on top of violating a number of laws and probably the very constitution, it is problematic and seriously harms the interests of the Cyprus Cooperative Bank,” the Audit Office said in its 2016 special audit report for the finance ministry on its website.

The auditor’s office said that it requested Attorney-general Costas Clerides to opine on the matter after the Republic’s auditors saw their reservations about the decision and requests to reverse it rejected by Finance Minister Harris Georgiades, the report said.

“As our agency continued to have serious doubts about the lawfulness of the said decision of the council of ministers, we requested the Law Office of the Republic in a letter on June 28, 2017, for an opinion,” the report said. “The Attorney-general’s opinion came on July 11 and we forwarded it to the finance minister requesting to be briefed about his action to comply with the law”.

In his extensive and thorough response, Clerides said that he believed that based on the facts presented to him, the provisions of the law on the accounting, fiscal and financial management and the law on the restructuring of financial corporation as well as the constitution’s provisions on the principle of equality were violated, the report added.

The Cyprus Cooperative Bank, into which the government injected almost €1.7bn in the form of fresh capital in 2014 and 2015, is obliged by the European Commission’s directorate general for competition to reduce the government’s stake of over 99 per cent to 25 per cent or lower via the successive issue of new shares. The first capital increase is scheduled for this summer. The bank is currently struggling with a €6.4bn mountain of delinquent loans which account for more than half of its portfolio.

In August last year Georgiades said the government had secured written approval from the European Commission to go ahead with the stock donation plan which the bank’s requirement to raise fresh capital did not cancel, substitute or delay.

On the same day, Yiangos Demetriou, head of the supervision department at the Central Bank of Cyprus, warned that Cyprus’s second largest bank risked going out of business should the government stick to its decision. Central bank governor Chrystalla Georghadji also expressed reservations about the government’s intention.

Georgiades, who according to press reports no longer wishes to remain at the finance ministry, after President Nicos Anastasiades’s re-election, has a tense relationship with Auditor-general Odysseas Michaelides. In November 2016, he engaged in a war of words over the Audit-office’s right to audit the state-owned bank. Then, the Attorney-general again sided with Michaelides.

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About Author

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

  • Barry White

    Some might call it the Bank shares that they can’t even give away. And they may be right.

    • Neroli

      Some even call it a bank!

      • Barry White

        And Ms. N, we all know that would be silly. More likely, a holding pen for overpaid and underworked sheep!

  • Bruce

    But what was most astounding was Minister Georgiades’ proposal to donate some of the shares in the Coop to “reliable borrowers” of the Bank.

  • Pullaard

    Now we see why Harris no longer wants to be Finance Minister. Imagine having to face the wrath of Odysseas! At least as Foreign Minister he’d be able to escape the great man’s fury.