Co­op­er­a­tive bank cuts rates on farm­ing, stu­dent loans

Financial Mirror (Cyprus) - - FRONT PAGE -

The Cyprus Co­op­er­a­tive Cen­tral Bank (CCB) is go­ing ahead with a re­duc­tion of in­ter­est rates on farm­ing loans by 2 per­cent­age points to 4.75% for about 8,500 ser­vice­able loans, while the rates on non­per­form­ing loans will re­main at 6.75%.

If the NPLs in the ar­eas of an­i­mal hus­bandry, agri­cul­ture and fish­ing are on a path to be­ing ser­viced or re­struc­tured, th­ese will grad­u­ally see a re­duc­tion of the in­ter­est rate to 5.75% and six months later after that to 4.75%.

This fol­lows a sim­i­lar re­duc­tion on stu­dent loans an­nounced ear­lier this month, while the CCB also said it would re­duce rates for hous­ing loans in com­bi­na­tion with a re­duc­tion in de­posit rates.

“We ac­knowl­edge that the role of the co­op­er­a­tive sec­tor is not sim­ply to tackle to­day’s fi­nan­cial and bank­ing cri­sis, but to as­sist the prospects of the coun­try. We do not sim­ply aim to be a typ­i­cal fi­nan­cial in­sti­tu­tion, we as­sume our re­spon­si­bil­i­ties and we are fully aware of our pur­pose which is to work in the co­op­er­a­tive way,” said CCB Ex­ec­u­tive Chair­man Ni­co­las Had­jiyian­nis.

Prior to a 1.5 bln euro state bailout to cover its cap­i­tal short­fall, the CCB and the then net­work of some 90 in­de­pen­dent Co­op­er­a­tive sav­ings banks used to fo­cus pri­mar­ily on loans to the farm­ing and small to medium sized (SME) man­u­fac­tur­ing in­dus­try, as well as re­tail and hous­ing loans.

How­ever,

iden­ti­cal

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the

rest

of

the

Cyprus

bank­ing sys­tem, the lat­ter cat­e­gory was bur­dened with NPLs, trans­form­ing more than 50% of all loan­books into prob­lem­atic fa­cil­i­ties.

Since then, and fol­low­ing a 10 bln euro res­cue plan im­posed by the Troika of in­ter­na­tional lenders (EU, ECB, IMF), the Coops too un­der­went re­form, were na­tion­alised to 99% and 93 in­di­vid­ual co­op­er­a­tive credit in­sti­tu­tions merged into 18 sub­sidiaries di­rectly con­trolled by the CCB.

It was also one of four sys­tem banks that un­der­went a stress-test of its cap­i­tal ad­e­quacy and as­set strength last Oc­to­ber, show­ing the CCB with a favourable 13.4% Core Tier 1 ra­tio in an ad­verse sce­nario. Had­jiyian­nis also said that the Co­op­er­a­tives will move closer to the Euro­pean co­op­er­a­tive sec­tor through a more ac­tive par­tic­i­pa­tion in the Euro­pean As­so­ci­a­tion of Co­op­er­a­tive Banks, and is con­sid­er­ing join­ing the sec­tor of syn­di­cated lenders, sim­i­lar to other Euro­pean co­op­er­a­tive banks, pro­vid­ing fa­cil­i­ties to cor­po­ra­tions or large pub­lic projects.

Yian­nis Stavrinides, CCB’s head of Strat­egy and Com­mu­ni­ca­tions, said the bank hired Bos­ton Con­sult­ing Group to as­sist the Cypriot Co­op­er­a­tive sec­tor to im­ple­ment best prac­tices, strengthen good gov­er­nance and en­hance its pro­vided bank­ing prod­ucts.

How­ever, Stavrinides said it is still pre­ma­ture to dis­cuss any share buy­back by the Co­op­er­a­tive sec­tor to re­duce its de­pen­dency on its pri­mary share­holder, the state.

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