“The aim is to raise a billion euros so that we will not need support from the mechanism (international bailout) and cover the needs through our own funds,” said Andreas Mouskallis, chairman of the cooperative federation Should they fail, cooperatives can be recapitalised with funds earmarked for that purpose included in the island’s bailout.
The special shares will be sold to members, customers and the wider public, Mouskalis said. Cooperatives may need an estimated one billion euros through to 2015. The island’s €10 billion bailout includes up to €2.5 billion that could be used to recapitalise coops and Cyprus’ third biggest bank, Hellenic.
As part of its bailout, Cyprus had to wind down Laiki, the second-biggest, while depositors in the largest lender, Bank of Cyprus, will be recapitalised by imposing losses on depositors, a process known as bail-in. Uninsured deposits – over €100,000 – have undergone a so-called haircut of 37.5 per cent, which however could ultimately reach 60 per cent.
Under the bailout deal signed with international lenders, cooperatives will be given until July 31, 2013 to cover their capital shortfalls whereas other commercial banks will be allowed until the end of September 2013. Any institution that fails to raise the required capital within the set timeframe, thus requiring state assistance, will have to prepare a restructuring plan within two months from the applicable deadline for raising capital from private sources.
Cooperatives were already scrambling to restructure as partof the agreement that provided that cooperatives must shrink in number – from 96 to 35 – mainly through mergers. Mouskallis said mergers should be finished by July. Staff will be offered a voluntary retirement scheme in a bid to shed excess personnel, he added.
As part of the agreement, supervision of cooperatives will be shifted to the central co-operative bank from the trade and industry ministry. The Central Bank of Cyprus will also have a role in the supervision.
Source: Cyprus Mail