HB to take on 1100 CCB staff

Hellenic Bank’s takeover of the good asset portfolio of the troubled Cyprus Cooperative Bank is in full swing, but critics say it was sold on the cheap.

The deal comes amid criticism over selling off of a stateowned enterprise for a song and dumping the hidden cost on the shoulders of the Cypriot taxpayer.

The deal sees Hellenic Bank undertaking the management and the responsibility to cover the Co-op Bank’s customer deposits amounting to EUR 9.7 bln.

In return, Hellenic has obligations to assume assets belonging to the Cooperative, consisting of loans, bonds and cash, worth EUR 10.3 bln, including non-performing loans of about EUR 0.5 bln. Meanwhile, CCB assets worth EUR 8.3 bln are to be handed over to the state.

Finance Minister Harris Georgiades said: “The state has already taken on NPLs worth EUR 7 bln and participation in companies’ worth EUR 165 mln, against the EUR 2.5 bln deposit made in April. With the supplementary deposit of EUR 1 bln, the state will commit property belonging to CCB worth EUR 600 mln and serviced loans worth EUR 500 mln.”

Responding to criticism from the opposition, government spokesman Prodromos Prodromou wondered how “is it possible to sell-off something that had a negative value in 2013?”

Prodromou said that a probe requested by President Anastasiades will investigate the reasons that led to the Coop’s demise, and those found responsible will be held accountable.

The European Commission has approved “measures to facilitate the liquidation of Cyprus Cooperative Bank under national law”, which “involve the sale of some CCB assets and deposits to Hellenic Bank. Non-governmental deposits will remain fully protected at all times.”

Meanwhile, the European Stability Mechanism in a report warned: “High NPLs remains a key vulnerability for banks, which suggests the need for a reform in the insolvency and foreclosure framework and poses a risk for the economy going forward”.

Cyprus’ largest creditor pointed out although the necessary frameworks aiming at reducing NPLs are in now in place “they are still inefficient and little used.”

The country had borrowed a total of EUR 6.3 bln from the ESM in 2013, as part of an EU – IMF financial bailout package.

The ESM underlined: “Banks are more and more in favour of offloading impaired assets from their balance sheets mostly via debt-to-asset swaps, which deliver NPL reduction in the short-run but leave banks with significant exposure to the real estate sector.”

Hellenic is set to take on some 72 branches and 1,100 of CCB’s 2,600 current employees, which is believed to be one of the challenges HB will have to deal with over the coming period. With 40% of its post-deal workforce being ex-Coop employees, the bank will have to tackle various issues that may arise from the fact that CCB employees are paid less than their HB colleagues.

Furthermore, the fact that CCB employees will bringing along their own union problems to cause headache for HB’s management.

Unions have demanded that CCB staff to be made redundant or leave the Co-op through a voluntary retirement scheme should be compensated with an amount between EUR 100,000 and 200,000.

These demands have drawn fierce criticism from the Employers and Industrialists Federation (OEV) who slammed them as “unacceptable and provocative”. The federation warns that a dangerous precedent will be created if these sums are paid.

In the past, CCB had put forward two voluntary retirement schemes, with the first one offering compensation of EUR 110,000, while the last one (not implemented due to developments) had a budget of EUR 150 mln. Taking into consideration that 900 people will have to leave, that could mean that an average of EUR 166,000 could be given to each individual as compensation. be

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