CBC says Co-op worst case scenario theoretical amid bank run (Update-2)

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(Adds comment by Bank of Cyprus and Hellenic Bank sources in fifth paragraph)

By Stelios Orphanides

An increase in withdrawals at the Co-op compelled the Central Bank of Cyprus to say that Thursday’s comments made by one of its officials on the disastrous consequences for depositors of a failure to implement the Hellenic – Co-op deal were intended to highlight the worst-case scenario rather than present the probable scenario.

“The comments about the remote, theoretical probability of the liquidation of the Cyprus Cooperative Bank were made to stress the most extreme negative consequences if the transfer of the Cyprus Cooperative Bank to Hellenic Bank is not completed, a solution which under the circumstances constitutes the only alternative,” a central bank spokesperson said in an emailed statement on Friday.

On Friday, customers were queuing inside and outside Co-op branches leading to an increase in withdrawals, sources familiar with the matter said. In the first three months of the year, the Co-ops saw €2 billion in cash withdrawals amid concerns over the bank’s capital adequacy. Depositor concern was amplified by comments made by opposition politicians who left open whether their parties would support a government bill that would allow the government to extend guarantees to Hellenic Bank to shield it from a probable under performance of assets it agreed to acquire.

The Co-op, the second largest lender on the island, has a ‘very important market share in deposits’ facilitating ‘critical functions’ for the economy, the central bank spokesperson said.

The Cyprus Cooperative Bank declined to comment. Sources at Bank of Cyprus and Hellenic Bank said that the two other lenders had not seen any unusual inflow or outflow in deposits. The Cyprus News Agency reported that customers withdrew on Friday €70m until noon.

“Therefore, interest and economic and financial stability necessitate that there is no impact on insured depositors. Therefore, even in the case of considering the probability of resolution, public interest will lead to the complete protection of insured deposits without raising the issue of liquidating the bank if the deal on the sale of the Cyprus Cooperative Bank’s operations is not completed,”

On Thursday, Yiangos Demetriou, head of the central bank’s supervision department warned members of the parliament’s watchdog committee of the ‘disastrous’ effects the non-implementation of the agreement signed by Hellenic Bank with the Cyprus Cooperative Bank on Monday would have. Demetriou had also said that the European Central Bank and the Single Resolution Mechanism, were preparing for a scenario under which the deal was not implemented.

The deal, which provides for the transfer of the Co-op’s operations to Hellenic, including €9.7bn in deposits, would spare the Co-op from being liquidated, Demetriou said.

The implementation of the deal also requires the approval of a bundle of amendments in legislation to help banks reduce their non-performing loans, which the European Commission set as condition for allowing taxpayers’ money to facilitate the deal.

The Central Bank of Cyprus spokesperson added that deposits up to €100,000 per individual or legal entity per financial institution remain guaranteed in accordance with a European directive transposed into national law.

In 2013, depositors at Cyprus Popular Bank lost all their uninsured deposits after the bank ran out of capital while those at Bank of Cyprus recapitalised it with almost half of their savings in excess of €100,000.

 

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About Author

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

  • Colin Evans

    It really is very easy. Get your money out before the doors close for good!!

    • Terryw45

      If you are dumb enough to still have your life savings in the co-op, you deserve all you get (or don’t get) !

  • Mint

    Will Hellenic reconsider deal after deposits flight? Wonder how much will remain?

    • Didier Ouzaid

      Hell, they already got a near risk-free deal as it is…

      • Mint

        They are bankers not a charity organization…
        Capital controls were introduced on fixed deposits, according to the guest on exeis meso program.

        • Neroli

          Who are bankers?? ?

          • Mint

            Typo! My apologies should have been thieves..

    • Copernicus

      Deposit flight is good for government as less assets have to be paid to HB to match liabilities!
      Victor
      The Co Op has failed and there is only the split of good and bank. The difference today as compared to 2103 is that the insured deposits of Laiki were transferred to BoC plus all the assets of Laiki whereas now the total deposits of the Co Op (mostly insured) are to be transferred to HB with a mix of loans and billions worth of ROC bonds gifted by the Government; the same government who four months ago said all was well with the Co Op.
      Victor do you think these MPs have the cocones to vote NO? I think not because then resolution of the CO Op will follow and this is what the CBC official meant and it begs the question who has the money to pay all insured deposits. I guess the SSM which should have had four eyes on the Co Op not two eyes of the CBC

    • alexander reutersward

      I think they will, the Hellenic will not get XX billions in Cash, they will get around 10% of depositers money in cash, the rest is a liability that i doubt they can afford. It might be seen as performing loans today, but what about tomorrow.

  • Victor Lazlo

    If Co-op fails, watch for contagion – the domino effect of one bank failing leading to others failing too, if they have a significant exposure to the Co-op Bank, either directly or indirectly. Another bank failure would undermine confidence in Cyprus banks yet again, and lead to further runs on other banks.

    • JS Gost

      We can only hope. 2013 buggered things up completely with the EU and Cyprus just using sticky tape and hopeful dreams. Cyprus needs to collapse completely and suffer massive austerity to actually make the retarded ( yep, I mean it) electorate wake up and realise change is not an option, like in 2013, it is an imperative.

  • Kevin Ingham

    We still have to hear an update on the Co op decision to freeze bank accounts of those with NPL’s with the Co op and use the money to pay their NPL’s

    If that is the way the government is going to deal with NPL’s then it goes without saying people will be taking money on deposit with Hellenic out of Hellenic in case it is frozen and used to pay their NPL’s with Hellenic.

    They may also take all their deposited cash out of all the Cypriot banks in case their is an across the board/ banks solution to the problem. This is an almighty mess

    • Neroli

      There should be a freeze on all banks deposits /accounts of defaulters!

  • Barry White

    It’s Friday, do you know where your money is ?

    • Terryw45

      Under the mattress !

      • Barry White

        Atta boy.

        • Terryw45

          Unlike March 2013, it will still be there Monday morning, I hope!

    • SuzieQ

      It’s in the tin marked “coffee” in the cupboard to the right of the sink.

      • Neroli

        Oh thanks, do you have his address as well?

      • Barry White

        Is it bigger than a bread box?

        • SuzieQ

          I need a point of reference, can you point me in the right direction to your breadbox?

          • Barry White

            Disclaimer: I am on my way to the naughty pew with my hat and coat. But I simply am not able to resist in my reply. The only slight defence is to say that ‘it was not my fault’ and ‘ I was provoked’.

            If you show me your breadbox, I will show you mine.

            Door closes on Barry’s posterior as he ambles down to the coffeeshop expressing regret for any offence.

          • SuzieQ

            I really think that, on current behaviour, you need to consider joining the Foreign Legion….

          • Barry White

            All the girls love a man in uniform, and when that man is the luuurve machine……..

    • My fortune is hidden inside Cerberus’s collar the “hound of hades”.

      • Barry White

        My suggestion to the Cyprus Foreign Investment Promotion Board for their 2019 marketing and advertising to attract foreign investors is: ” Make a small fortune in Cyprus, we will turn your large fortune into a small one.”

  • Adamossss

    Another haircut ?

    • Kevin Ingham

      They can’t afford one- it is the national government that has to guarantee deposits under Euro 100,000 through the EU deposit scheme, and Cyprus simply does not have the borrowing power to do it (let alone the money)

      Crazy situation though it is, that is the basic fact. It’s a bit like being unable to undergo life saving cancer surgery because your heart can’t take it

      • Wanderer

        That’s exactly why the haircut of 2013 was implemented – the gov could not afford to pay the €100,000 guarantees.

        • Barry White

          Right…….. the Tof`s cupboard was bare.

          • Neroli

            They had all helped themselves to it

  • John Henry

    Geez, did’nt see this coming…that soon…I thought it be another few months at least.

    • Terryw45

      Really, amber 2008, red 2013, and still have your thumb up your a………!

  • Neroli

    Folks take your money out! You really thing there is enough funds available to guarantee all deposits under €100,000!!

    • Terryw45

      Sorry, apologies, it’s been a long week and I did not put enough tonic in !

  • Neroli

    €70 mil til noon is it still flying out the ATM ‘s I wonder?

    • Terryw45

      The writing was ‘on the wall’ and they wait until 23.59.59,(local time) forward planning at its best!
      Do they ask their children for advice, or grandparents, teachers, lawyers, or maybe ‘Nik’s financial adviser !

    • alexander reutersward

      not just the ATMs, the big money is moved by Internet bank transfers 😉

  • alexander reutersward

    the is guaranteed but its not by Europe, its by Cyprus.

    Can the Cypriot guvernment handle that guarantee, maybe,,,but if people start to withdraw from BoC and Hellenic as well…then a meltdown will occur

    • costas

      The COOP has over 1 billion in cash.Billions in Cyprus bonds that can be sold.Some of the deposits are not insured.The other banks will rush to take the good customers.This means the COOP will get paid for the loans.The only involvement of Cyprus(that is the government)is because it is the owner of the COOP.Otherwise any administrator could handle.

      • The Truth

        Now how much did they get from the Government? Must have been a going concern.

        • costas

          I don’t understand what you mean by going concern.The Government gave it bonds.It can do whatever it wants with them if the agreement falls through.In any case one would think taht a going concern does not need government help of this magnitude.

          • The Truth

            The bonds issued why?

          • Barry White

            Another good comment, ‘The Government gave it bonds. It cam do whatever it wants with them….’ The taxpayers may wish to tell the Government that they are not interested in paying for them. The Government can simply not pay, using the standard clause, ‘it is not my fault’ in the purchase documents, or pay it from the Civil Servants, Judiciary and MP’s pensions and salaries.

    • Mint

      They can introduce the Moratorium tool on insured deposits that was proposed by ECB in Nov of 2017 to prevent a meltdown. We are the guinea pigs you know!

  • The Truth

    Tick Tick Tock – the run ain’t going to stop. Get what you can out of ROC ASAP. Garenti Bankasi in Girni is good.

  • Wanderer

    Wow. People still kept their money in this “bank” to this day? Unbelievable level of indifference to their own finances.