articles | 03 January 2014

Co-op banks currently unable to lend money

Cyprus’ co-op banks won’t be able to lend money before the end of winter when the ailing movement’s restructuring plan gets approved paving the way for its recapitalisation.

This was recently revealed by the board of directors of Cooperative Central Bank Nicholas Hadjiyiannis. “There is a big anomaly in the market, as there is no lending at all right now. The co-op movement will be recapitalised once its restructuring plan gets approved,” said the 43-year-old non-executive director who took over the position in November. “The plan is more or less ready, it is in the process of being updated and it has to go before many organisations such as the European Competition Authority and then the Troika (of international lenders) for approval. End of winter is when approval is expected to come,” he added. In fact, the deadline is end of March but the money is already sitting in the Central Bank of Cyprus, he said. “The money is there...It is a matter of procedure. We are also in the process of getting €50 million from the European Investment Bank within the next two-three months. We are trying to speed that up.”

As part of the island’s €10 billion international bailout, co-ops are to receive €1.5b in taxpayer’s money for restructuring. But this means that the sector will also be reduced in size through mergers and will come under the supervision of the Central Bank. Hadjiyiannis, a quantity surveyor graduate from Redding University whose post graduate degree from City University is in shipping, trade and finance, believes the future of the co-op movement is bright. He said short-and mid-term goals are manageable considering that more than half of the movement’s portfolio is manageable. “We have a loan book of about €13.5b and at the same time we have over €16b in deposits. We have a balance sheet in excess of €17b, so we have liquidity, we are comfortable in terms of liquidity,” Hadjiyiannis said.

“In terms of assets, the last assessment we had showed an estimated 40% of loans are non-performing loans. But these are not in the hands of a few loan takers. And that is one of the reasons we believe the situation is manageable in the mid-term,” he added. 75% of the co-op sector is retail therefore it has very small exposure to big loans in business. “We have a 17% exposure in SMEs, and 8% is government and government guarantees. So, more than half of our portfolio is fully secure.”

Source: InCyprus

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