Co-ops won’t need any more funds… for now, says gov’t

Co-operative Central Bank, bailed out by the government with a EUR 1.67 bln injection, will not have any capital needs at present and will list on the stock exchange soon, Dionysis Dionysiou, Head of the Management Unit for the co-operative sector at the Ministry of Finance has said.

Briefing the House Finance committee, Dionysiou said that in case any capital needs arise, the CCB will have to proceed with a capital raise by June 30 2017, otherwise it will have to September 2018.

He noted, however, that market disruptions due to the Brexit vote or other international developments, such as the downturn in the Italian banks and Deutsche Bank, may cause the need for fresh capital.

The Co-operative sector has been bailed out by the government which injected EUR 1.67 bln on two separate occasions, EUR 1.5 bln in 2014 and EUR 170 mln in 2015. Under the EU state-aid rules, government money can be granted only when a restructuring plan is in place.

Dionysiou said that the most important target in the restructuring plan is the gradual reduction of the state’s holdings in the CCB share capital. Currently, the state owns 99% of the CCB share capital.

“In any case, in the context of the agreements signed,

raise

capital by the CCB is obliged to complete the process and to be ready to join the Cyprus Stock Exchange (CSE) by the end of the year,” Dionysiou added.

The Finance Ministry official said the CCB has already launched the procedure to acquire the necessary licences to join the CSE, noting that the CCB has submitted its first draft prospectus to the Securities and Exchange Commission (CySEC).

He added that based on the restructuring plan’s targets, in case it has no capital needs, the CCB should increase its share capital by at least 25%, noting that only a quarter of this capital issue will be made in the form of an initial public offering.

After 2019 the CCB should continue the capital raising procedure every nine months so that the state participation would be reduced to 25%.

Furthermore, Dionysiou said the CCB has completed loan restructurings amounting to EUR 2 billion.

The CCB is directly linked with the Cypriot economy as 99% of the deposits come from Cypriot residents, while it has granted no foreign loans.

“Therefore the improvement of the local economy leads to the improvement in the CCB’s indices,” he concluded.