Harris to act on Co-op depositor concerns, as Andros fuels them (Update-1)

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(Adds comments by Andros Kyprianou in tenth paragraph)

By Stelios Orphanides

While the finance minister promised action to reassure Cyprus Cooperative Bank depositors who fear they could suffer losses in a possible bail-in, as the lender enters negotiations with investors, the leader of Akel publicly sowed doubts about the security of deposits before seeking to play down his comments later on.

“The state has the financial capacity and political will and is at the stage of carrying out additional moves in the next days that will safeguard depositors in a definitive and irrevocable way,” finance minister Harris Georgiades told state radio CyBC on Friday. “A decisive step is imminent which will have both symbolism and substance. Even those concerned that something might go wrong will see that the state is showing the way”.

“I am talking about tomorrow, the day after tomorrow, about a step that will run parallel” to the current procedure which could lead to the acquisition of the entire bank by an investor, the minister said.

Georgiades assured depositors that their deposits were safe.

“There is no concern for any deposit, provided that things proceed the way planned,” he said. “It is a controlled (and) credible procedure which aims at securing depositors”.

“Things will change as other things changed in our country over the past years,” the finance minister added. “But every time we dared to take a step towards change, the impact was positive”.

The Cyprus Cooperative Bank, which struggles with a €6.5bn mountain of non-performing loans, roughly half of its loan portfolio, received €1.7bn in taxpayers’ money in the form of two successive capital injections in 2014 and 2015.

The bank, the result of a merger of hundreds of savings banks scattered across the island is facing the prospect of further increasing its provisions for loan impairments, which could wipe out much of its remaining equity.

An expression of interest procedure completed on Thursday showed that there is interest from at least two strategic investors to buy out the lender and two or more financial investors to acquire a stake or assets. In September, the bank had almost €12bn in customer deposits.

Minutes later, Kyprianou also told the CyBC radio that he had doubts whether deposits, even those below €100,000, the amount guaranteed by the government, were safe and would not be affected in a possible repetition of the 2013 bail-in.

Then, depositors at Bank of Cyprus saw almost half of their deposits in excess of €100,000 converted into equity while those at Laiki lost all their uninsured deposits.

“He should remember this and the decisions about the Co-op after May,” said Kyprianou in response to the finance minister’s comments.

The minister should remember that “the first €100,000 are safe and that there will be no interference because this government made many promises to the Cypriot people which it easily forgot,” Kyprianou, whose party traditionally opposes economic reforms, including privatisations and stricter foreclosure laws, added. “If there is someone who has caused problems to the Co-op, that is not Akel. It is those who are administrating and have made sure to bring it to today’s condition”.

“People ask me whether the €100,000 are safe,” the opposition politician continued. “I say that I cannot guarantee that, but the finance minister has said publicly that they are. I wish and hope that he is right”.

Hours later, Kyprianou denied that Aκel was behind rumours encouraging depositors to withdraw their funds from the Co-op.

“The small amount I have together with my spouse is deposited at the Co-op and I never withdrew it,” he said.

On Thursday, an executive of the Co-op said that there had been cash withdrawals in recent days after the bank announced its intention to seek private investors.

“I honestly wonder why these rumours are circulating,” Kyprianou said. “They are unacceptable, condemnable and Akel has never acted this way”.

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About Author

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

  • Neroli

    I would remove my deposits if I had any in the Co Op

  • Barry White

    So the €1.7 billion in taxpayers’ money is disappearing into the hands of depositors, ’employees’ and NPL’ers at the counters, wire transfer desks and ATMs.

    All going to plan then.

    • Cyprus MH

      the 1.7 bn was to bail in the bank, and not to put money in depositors hands. depositors will be lucky if they don’t lose money.

      • Barry White

        Cash in €1.7 billion, cash out €1.7 billion.

        Money is never lost. It simply is taken from one pocket to another.

  • Copernicus

    MIDAS touch has gone. Bring back the TROIKA asap as bad habits die hard in the ROC.

    • Barry White

      The Midas touch in reverse is the usual modus operandi here. Where everything touched turns into s…., no reason for uncouth language.

  • Neroli

    “There’s is no concern for any deposit PROVIDED that things proceed the way planned……….

  • Ιοαννις Γεωργιου

    Please dear Stelios dont give such notions to Haris he might appoint next to Hadjiyiannis Irena that now adays she is unemployed or even Savia now she is back from the ECB

  • Disenchanted

    Harris is completely out of his depth to make such an announcement, it can only make matters worse. A bank run is now imminent, if not already under way.

    • Neroli

      Exactly!

      • Disenchanted

        He now shows how unsuitable he is as central bank Governor. In case anyone had any doubt. In general, the government’s constant intervention in the banking system including the central bank and the coop has made matters worse. Five years from the crisis, there’s no excuse for no progress dealing with NPLs.

        • Neroli

          He isn’t not CB governor Chrystala is, and where is she?? Harri is Finance Minister

          • Disenchanted

            I hear he is likely to replace her, when her term finishes next year

          • Neroli

            Ahhh! Haven’t heard that!

          • Disenchanted

            He needs to take a crash course on central banking first, otherwise it’s going to be another disaster. At least unlike Orphanides he doesn’t pretend to know it all.

          • Neroli

            Like all the ex governors of the CB has any of them been a banker first and foremost, not even Crystaltips is! The rest are either in jail or about to be! Appalling for a central bank

          • Disenchanted

            As I explained to you yesterday, the ex governor is an expert in banking, and that’s why Anastasiades didn’t want him there

          • Evergreen

            True

    • Neroli

      I’m sure it’s under way!! After the fiasco with Laiiki……..

    • Ιοαννις Γεωργιου

      Haris my friend is not even a trained economist ,he studied some PPE course and with a masters in mediterrenian studies ,whatever that is , as far as his judjement apponting Irena Hadjiyiannis and accepting Crysstalleni in CB there is nothing more anyone can add

  • almostbroke

    I notice he has nothing to say about the taxpayers concerns , after all they ‘ponied up ‘ 1.7 billion , ah ! Who cares about the taxpayers , they are not ‘in the know ‘ or on the’inside track ‘ !!!!!

    • Bananaman

      Harris is the main culprit he organised the heist

  • CyprusOilMan

    All will be perfectly fine …. provided such “moves” comply with the European Bank Recovery and Resolution Directive (BRRD) and EU State Aid and Competition rules.

  • Evergreen

    What an ambiguous statement!

    • Bananaman

      Yes like he is in the dock ✈

  • Kevin Ingham

    Everything will be done to avoid another bail in (although that is the preferred option now within the EU) because it would cause a run on all the other banks that have similarly high NPLs (they all have ridiculously high levels)

    Problem with that is that the government does not have the credit rating or the money to absorb the losses of the bad bank or guarantee the deposits

    At some stage the law has to change to allow banks to go after defaulting borrowers (and that will not be a pretty sight)

    • Barry White

      Don’t you just hate it when you run out of other peoples’ money to spend?

      • SuzieQ

        I see you’ve got your “Friday” head on—-ready for the pew?

        • Barry White

          Ready, Aye, Ready. And it is a Good Friday !!!

        • Neroli

          Think many of us might be going there!

          • Barry White

            As the usher in the good church Patro, I always make sure that there is a place on the naughty pew for lovely ladies.

            Speaking of lovely ladies, I have not seen Adele in her place on the pew recently. I do hope that she is well and that she is not a lapsed follower. If a song will help, I am always ready to oblige. Take care.

          • Neroli

            Ok please keep me a space. Sadly there are many lapsed followers due to the trolls that have taken over. Notice there are none on this article today!

          • SuzieQ

            You’ll be very welcome–bring a bottle!

          • Neroli

            Red? Have a great Easter weekend Suzie

          • SuzieQ

            And you!

  • Barry White

    “The state has the financial capacity and political will and is at the stage of carrying out additional moves in the next days….” It is a bank holiday week-end.

    • Bananaman

      That’s when he will shut the doors and extend the holiday for two weeks

      • kimberworth

        Hey, i thought they were on a permanent holiday.

    • Neroli

      Seems we’ve been here before!

      • Barry White

        One dead DoDo bird, Laiki; two dead DoDo birds, Coop; and then onwards. There are the other banks to close down, Cyta, the Electric and so on. Did we mention Cyprus Air???

        Each and every one destroyed and looted by the usual suspects and yet: ‘ It is not our fault, no sir, it is everyone else’s fault’.

        Nothing like a good bank run to get the peasants thrusting themselves up from their easy chairs in the cafes. By then of course, the Masters have already taken theirs.

  • John Henry

    The same government that stated there’d be no haircut in 2013, is now saying they’ll be no haircut…cue the opening music to Monty Python’s flying circus…

    • Barry White

      Given this week-end, I prefer the music from the ‘Life of Brian’

  • Neroli

    And continuing to queue to empty them!

  • Neroli

    The banking here is one big robbery!

  • kimberworth

    SO thats why the the banks are full of punters this morning, my wife gets her pay in her co-op account always 3 days later than her friends with different banks

    • Neroli

      Tell her to change her account t one of those other banks!

  • mongasz

    assurances by these clowns?? they are worth nothing – just hot air by incompetent fools

  • Barry White

    Actually Ms N, I like to refer to it using the name of the company that ‘bought the use of the name, for I believe 10 years.

    What can be more Cyprus in every respect than the name of ‘Charlie Airlines’ It doesn’t get any better than that.

  • alexander reutersward

    Considering that Harris made a statement, the bank must have been hit hard by withdrawals, let’s hope it won’t spread to the other banks…it’s enough that 5-7% of all deposits is withdrawn to have a new massive financial crisis .

    • Only 11% liquidity is required anyway.

      • alexander reutersward

        Exactly last number I remember is that they had 14%, if it has gone down 4% to 10%, then the bank is in trouble..

        • The EU guidelines are specific. No insolvent bank will be extended ELA.

          • alexander reutersward

            If the central bank gives them correct numbers;)

    • Disenchanted

      I hear there was a bank run at the coop today

  • Copernicus

    MR HG should refrain from comments as he doe more damage. If he and his mandarins at the MOF did their job properly they should have consulted with the EU and seen if they can guarantee the deposits like Ireland; obviously hard to do so hence they must not allow this situation of whispers and rumours since trust is very fragile at the Co Op. We must wait to see what the expression of interest by investors means since they have expressed interest but this does not mean a commitment since due diligence will have to be conducted.
    What the government has not realised that all these months of inaction and waiting for Godo to turn up may have made things worse since deposit flight does not rely on trust of the government, but on fear of losing, especially when there is a bad experience. Panic and fear rule the day and action speaks louder than words. Get on with mInister and get the EU approval before you announce something!

    • Neroli

      You mean the EU to guarantee the deposits? I doubt it, and Cyprus doesn’t have enough to guarentee them – I’m sure, !

      • Copernicus

        The ECB has shown to be innovative when it wishes to protect systemic banks in the eurozone and the Co Op is such a bank. Cyprus cannot act without EU approval of its actions due to state aid. I would not be surprised if there was support from the EU agencies (ECB/SSM).

        • Kevin Ingham

          If another Cyprus bank bites the dust they all will, so indeed the ECB will do their utmost to prevent that, but ultimately that can only happen if Cyprus introduces the legislation and reforms required by the Troika last time round.

          The entire Cypriot economy is drowning in debt and nothing has been done to alleviate that. At the current rate it will take decades to sort out the mess and Cyprus does not have decades (couple of years tops) before a more brutal solution is implemented

          The law needs changing , the judiciary needs reformed to accommodate the law, the SGO’s need to be sold off to provide some sort of capital buffers for the state, and if that does not happen the ECB will have no option but to pull the plug

          • Copernicus

            The Cyprus banking system would not be experiencing the problems it now faces had the government introduced what other countries did; an asset management company that would manage these assets over a period of 15 -20 years without the need for provisions and equity; NPLs in 2013 were about 30%. Instead, in order to protect the developers, the government and central bank came up with three internal bad banks. This failed miserably and now the banks have become debt collectors which they outsourced. Had the banks sold off their bad loans they would have derisked their balance sheets. This is what is required and no amount of reform or laws will change this in the near term. The government protected a group of developers at the expense of the tested resolution of NPLs in other countries. They did so by appointing at the banks and the CBC their yes men and now they will reap what they have sowed.

          • Disenchanted

            In Ireland the developers and the politicians backing them paid the price for the crisis. In Cyprus, instead of that they continue to be in charge for the economy, because they convinced everyone the crisis was caused by cheques to pensioners issued by Christofias…wonderful stuff

          • Copernicus

            SSM may provide precautionary recap for a period with commitment of local bank to buy them out. This could be guaranteed by the ROC and it is quick and efficient. SSM/ECB can step in for a short period and one hopes that the mOF has done its homework. ELA will be bad news as people will remember what happened to LAIKI!

          • Disenchanted

            In the short run, ELA May be needed to plug the hole created by deposit outflows, without ELA they will have to turn away depositors which can cause panic. ECB can only offfer liquidity, SSM cannot offer anything other than hand them over to SRB to take action

          • bambos

            Exactly. ELA is to cover liquidity shortfalls, not permanent capital shortfalls. The latter mean resolution via the SRB. And if that is the outcome, how will the deposits be covered/guaranteed, given the limited resources of the Cypriot government?

          • Copernicus

            Quite right. In Ireland prices corrected and foreign investors bought and property has rallied solidly. In Cyprus there is dysfunctional property market and the banks think they can manage real estate instead of banking.

          • Ιοαννις Γεωργιου

            You are absouletely right

          • GSP

            The Cyprus banks would not be in their present, precarious state if the spineless government ( Remember yesterday’s comment, ”’ bold steps”) had not made foreclosures almost impossible. If the mortgage cheats on the island thought they would lose their posh cars and extravagant houses, they would soon either pay up or downsize.

          • Evergreen

            Again☺well said.

          • Evergreen

            The first paragraph: yes the reforms as promised to TROIKA are needed to be initiated otherwise another fiscal crisis is in the air.

        • Disenchanted

          ECB May be reluctant to provide ELA this time, in light of past experience, Cypriot politicians instead of being thankful Wanted to sue Mario Draghi!

        • bambos

          Unlikely. Coop might be a D-SIB, but it is no G-SIB or even an “EU-SIB”. The 2013 crisis / bail-in proved that a banking crisis in Cyprus is easily contained, so I doubt the ECB are too terribly worried. Coop can disappear tomorrow, and outside Cyprus, few would notice, and even fewer would care.
          The other Cypriot banks, while in general healthier than the Coop Bank, suffer from the same issues, albiet on a relatively less severe scale. Let’s hope it does not turn into another systemic crisis.

          • Copernicus

            If you think the Co OP can disappear without infecting the rest of the banking system you may have to think again. Trust is very fragile and with banks having 50% NPLs you feel it is OK to let the Co OP fail? The other banks may not have the same problem but they do share in very low profitability and having to make new provisions or even raise more equity. The SSM wants NPLs to be reduced and quickly.

    • GSP

      “this does not mean a commitment since due diligence will have to be conducted.”
      Due diligence? In Cyprus?
      To decide to whom we award a tender, all that needs to be done is to weigh the brown envelopes and pass them out.

      • Evergreen

        Well said

  • Mist

    Markets closed for the other Easter…………………..a presage.

  • Barry White

    All the girls love a Sailor.

  • clergham

    Nothing to see here

    Just follow the TOF school of economics and guarantee the deposits with a government IOU

    Job done

  • bambos

    As of the latest publicly available financials from September 2017, the coop had about 12 billion in customer deposits. On the asset side, it had about 3 billion in cash and equivalents, and about another 1 bn in bonds and similar instruments, probably CY government securities. So that means, it has at most – and not counting repayments coming in from the few performing loans it still has – about 4 bn in liquid assets to cover 12 bn in deposits. While not an abnormal situation in and of itself for any bank in solid financial condition, the Coop is an institution that is technically insolvent, and only continuing to function due to regulatory forbearance. Of its 12 bn loan book, 6.5 bn are non-performing, and given Cyprus’ legal environment, these loans cannot be foreclosed and the money will not be recovered. Considering the huge volume of NPLs still uncovered by provisions, and considering the fact that the “collateral value” the bank holds against its loan book is vastly overstated (how can collateral have any value whatsoever if a property cannot be foreclosed?), this is a bank with no capital in real terms. Its accounting capital is a fiction.

    So when this bank is eventually put into resolution – unless a truly foolish, stupid “investor” can actually be found, or unless taxpayers are milked again – how will depositors get their money when 8bn of deposits are uncovered by any liquid assets? Even counting “performing loans”, leaves 2bn of deposits uncovered, and of course, even performing loans cannot just be called in overnight. Such money will take years to be repaid. Simply put, when the fiction of this institution being a going concern is finally put to rest, an 8 bn or so hole will have to be plugged in order to pay depositors.

    Where will this money come from? The CY government has nowhere near the resources to cover this. Bail-in? Possibly a “special levy” on all deposits in Cyprus? Taxpayer funds? One way or the other – absent the miracle outside investor – there will be more pain from this bottomless pit of an institution. Certainly, the government “guarantees” any deposits under 100,000 but it doesn’t have 8bn to cover it immediately, so depositors are likely to get an IOU, and see their deposits frozen, and only progessively released. (A stealth conversion of deposits into a CY government bond). Anyone who is still keeping anything more than the bare mimimum of deposits necessary for expenses, in this “bank” or any other Cypriot bank, is not paying attention.

    • Ιοαννις Γεωργιου

      This is an acurate assessment , i would like to add that over 3 billions of loans are resting in the balancesheet in the l&r (loans and receivables) a dubious accounting practice and most likely all of them are non performing and they belong to insiders like Chlorakiotis and offcourse are not counting as not performing which makes the situation much more disasterous than allready is , plus most of the mortgages that the bank is holding are 2nd and 3rd mortgage which make the recovery even more difficult , in all we are talking here about the definition of an insolvent financial institution

    • Evergreen

      Technically an apt assessment.

    • Kevin Ingham

      spot on

  • Ιοαννις Γεωργιου

    One thing not announced is that co op is allready relying heavily on ELA

  • comments-on-mail

    Dear Harry, your reluctance to be reappointed as Minister of Finance was enough to create a chaos. Probably you new how successfully the Coop was managed by the government, what was the actual situation as per the SSM supervisory reviews, what the EU blueprint would be in relation to Asset Management Companies and you were about to abandon the ship.