Cooperative bank cuts rates on farming, student loans

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.

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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.