Sun­day vote to rub­ber stamp Hel­lenic’s ac­qui­si­tion of Co-op Bank

Par­lia­ment also to de­cide on new NPLs leg­is­la­tion, as­set pro­tec­tion and mort­gage arears

Financial Mirror (Cyprus) - - FRONT PAGE - By Kyr­i­a­cos Kil­iaris

A mini-bank run on the Coop seems to have sub­sided as MPs will vote on Sun­day on state guar­an­tees al­low­ing the Hel­lenic deal to go through while also pro­tect­ing home own­ers in up­graded leg­is­la­tion on fore­clo­sures.

Through­out the week, thou­sands of Coop cus­tomers rushed to with­draw their sav­ings in a show of no con­fi­dence in pro­ce­dures tak­ing place in par­lia­ment.

The bank run fol­lowed state­ments sug­gest­ing that Co-op de­posits were not safe if the deal with Hel­lenic fell through.

Since Au­gust 2017 an es­ti­mated EUR 3 bln in de­posits have been with­drawn from the Co-op.

Over the past week alone, an es­ti­mated EUR 400 mln flowed out of Co-op banks dur­ing the panic, leav­ing it with just EUR 1.2 bln in cash re­serves.

As fears spread about a pos­si­ble bank­ing col­lapse, around EUR 140 mln was taken out of the Co-op on Tues­day and EUR 100 mln on Wed­nes­day alone.

In an ef­fort to put a halt on the bank run, the Co-op in­tro­duced cap­i­tal con­trols re­strict­ing with­drawals to EUR 3,000 per day.

News that the vote sched­uled for Fri­day was post­poned again, for Sun­day, fu­eled de­pos­i­tor anx­i­ety fur­ther.

MPs will vote on NPLs leg­is­la­tion and gov­ern­ment guar­an­tees for Hel­lenic, which are di­rectly tied to the HB-Co-op deal.

The vote post­pone­ment came af­ter leg­is­la­tors spot­ted gaps in the bill, due to the in­com­pat­i­bil­ity of the law re­gard­ing the pri­vate bank­ing in­sti­tu­tions and the one cov­er­ing the Co-ops.

As­set pro­tec­tion bill set to go through

The bill con­cern­ing state guar­an­tees pro­vides for EUR 2.6 bln to cover pos­si­ble de­fault of the loans taken on by Hel­lenic from the Co-op. This is ex­pected to be ap­proved as the gov­ern­ment seems to have se­cured a ma­jor­ity with the help of op­po­si­tion DIKO.

DIKO Pres­i­dent Ni­co­las Pa­padopou­los said his party will back the bill in an ef­fort to avoid an eco­nomic col­lapse.

“Those who a few months ago were mock­ing us about mummy’s money to­day are ask­ing us to con­firm that the tax­payer’s moth­ers will pay EUR 5.3 bil­lion...Those who told us that we have a suc­cess story, to­day are ask­ing us to save yet an­other bank un­der col­lapse. So, yes, there is anger but I want to send the mes­sage that this anger does not tar­get de­pos­i­tors, farm­ers and pen­sion­ers,” said Pa­padopou­los.

At the be­gin­ning of the week DIKO’s pres­i­dent had de­manded the res­ig­na­tion of the Co-op board in a let­ter sent to Pres­i­dent Anas­tasi­ades.

Days later the board had in­deed sub­mit­ted its res­ig­na­tion to the Pres­i­dent who ac­cepted.

Gov­ern­ment spokesman Pro­dro­mos Pro­dro­mou said the board was asked to re­main in place un­til the process is com­plete and the non-per­form­ing loan man­ager is set up so that the ap­point­ment of a new Board of Di­rec­tors would not be nec­es­sary.

Crit­ics said the board’s res­ig­na­tion was mean­ing­less, as it would cease to ex­ist with the com­ple­tion of the agree­ment with Hel­lenic Bank.

Op­po­si­tion howls over NPLs

Al­though all the var­i­ous fi­nan­cial bills should get through par­lia­ment af­ter an ex­pected com­pro­mise be­tween the par­ties, things may get tense when it comes to the is­sue of NPLs. Op­po­si­tion par­ties are de­mand­ing changes, which the Anas­tasi­ades’ ad­min­is­tra­tion feels may al­ter the phi­los­o­phy be­hind the leg­is­la­tion.

Speak­ing in par­lia­ment on Wed­nes­day, Fi­nance Com­mit­tee chair DISY’s Averof Neo­phy­tou, told MPs that “it would be bet­ter to re­ject the bills all to­gether rather than make changes which would change the essence of the leg­is­la­tion”.

Neo­phy­tou stressed that “if the ma­jor­ity of par­ties want to re­ject them, let them do so”, not­ing that the bills were drafted on the ba­sis of the re­quire­ments of the Sin­gle Su­per­vi­sory Mech­a­nism, so that the Cypriot banks pass the stress test.

He also de­clared fam­ily

Logi­com, a com­pany which fi­nanc­ing Deme­tra par­tic­i­pa­tion in the struc­ture of Hel­lenic.

Averof ad­mit­ted that “my wife and mother-in-law had bought 142,000 out of some 74 mil­lion shares”.

His dec­la­ra­tion fol­lowed pop­u­lar de­mand that MPs re­veal any pos­si­ble con­flict of in­ter­est in the HB-Co-op deal process.

Mean­while, op­po­si­tion par­ties pro­posed an amend­ment to the NPLs bill that se­cures

the right of bor­row­ers to take le­gal ac­tion against re­pos­ses­sion of their main res­i­dence if worth un­der EUR 350,000.

While crit­i­cal to­wards the pro­posed NPLs leg­is­la­tion, AKEL says that their pro­posed amend­ments fo­cus on the pro­tec­tion of bor­row­ers’ main res­i­dence and small busi­ness.

The main op­po­si­tion party wants to en­sure the right of cit­i­zens to ap­peal to the courts in cases of re­pos­ses­sion.

They also de­mand that cases of re­pos­ses­sions cur­rently un­der­way to be car­ried out un­der the ex­ist­ing le­gal frame­work rather than what the gov­ern­ment pro­poses.

An­dros Kypri­anou, AKEL’s Gen­eral Sec­re­tary, said that he does not be­lieve that the gov­ern­ment’s pro­pos­als will save Hel­lenic Bank and the bank­ing sys­tem in gen­eral, since they have not yet pro­vided any ev­i­dence to sup­port this.

He re­minded that un­til just a few weeks ago the same gov­ern­ment de­clared the Co-op­er­a­tive was not to be sold.

Kypri­anou de­scribed this be­hav­iour of the gov­ern­ment as “provoca­tive and un­ac­cept­able”, ac­cus­ing the Anas­tasi­ades ad­min­is­tra­tion of not as­sum­ing any re­spon­si­bil­ity for its de­ci­sions.

ESM calls for new le­gal frame­work

Euro­pean su­per­vi­sory agents are con­cerned with the Euro­pean Sta­bil­ity Mech­a­nism warn­ing over Cyprus’ in­ef­fi­cient le­gal frame­work to tackle the high bur­den of non-per­form­ing loans ham­per­ing the is­land’s bank­ing sys­tem.

The ESM, Cyprus’ largest in­di­vid­ual cred­i­tor, pointed out that al­though the nec­es­sary frame­works aimed at re­duc­ing NPLs are now in place “they are still in­ef­fi­cient and lit­tle used.”

Fur­ther­more, ac­cord­ing to Co-op fig­ures the frame­work voted in 2015 by law­mak­ers on fore­clo­sures pathed the way only for a small num­ber of re­pos­ses­sions.

The thou­sands of let­ters of for­mal no­tice sent by the banks seem to have had no ef­fect, as only 3.2% of the real es­tate in­volved was re­pos­sessed.

Out of the 5,400 prop­er­ties for which no­ti­fi­ca­tions have been re­ceived since Q3 2015, only 173 have been sold at auc­tion.

NPLs are 45.3% of to­tal loans in the bank­ing sys­tem amount­ing to EUR 21.99 bln.

‘ESTIA’

Part of the leg­is­la­tion re­gard­ing NPLs is a bill which fore­sees the cre­ation of a state agency to man­age the mort­gage-backed NPLs, within the frame­work of a plan dubbed ‘Estia’ (home) by the gov­ern­ment.

Talk­ing to state ra­dio, a se­nior fi­nance min­istry of­fi­cial said the scheme is de­signed to help strug­gling bor­row­ers re­pay their loans. It can pro­vide a re­duc­tion of up to 50% in their debts, com­ing from par­tial debt re­lief and sub­si­dis­ing the rate of in­ter­est owed.

Estia “leads to a con­sid­er­able de­crease of the obli­ga­tions of bor­row­ers”, said An­dreas Char­alam­bous, head of the fi­nance min­istry’s direc­torate for fi­nan­cial sta­bil­ity.

“We es­ti­mate 50%.” He said that the scheme “in­tro­duces proper in­cen­tives and there­fore, the re­sponse will be big al­low­ing the scheme to suc­ceed”.

Ac­cord­ing to the of­fi­cial, Estia is ex­pected to cover loans of up to EUR 3 bln.

Some EUR 800 mln is ex­pected to come from con­tri­bu­tions by the state and, by ex­ten­sion, tax­pay­ers over the du­ra­tion of the Estia Plan un­til 2044.

Mean­while, the Cyprus Land Devel­op­ment Or­gan­i­sa­tion (CLDO) has found it­self at the cen­tre of the ef­fort to re­duce NPLs to pro­tect vul­ner­a­ble groups. The CLDO was es­tab­lished by the state in 1980 in the con­text of its so­cial hous­ing pol­icy and is now called upon to play an im­por­tant role, to man­age the “Estia” project.

CLDO is in con­sul­ta­tion with the Fi­nance Min­istry in or­der to be in a po­si­tion to im­ple­ment the plan. The or­gan­i­sa­tion with just 35 staff, is ask­ing for an in­crease in per­son­nel and equip­ment.

An­dreas Fran­gos, the pres­i­dent of the or­gan­i­sa­tion, said it has un­der­taken the task of man­ag­ing the project.

“We gave our in­put on the ex­ist­ing main res­i­dence scheme and we were asked if we could help with the ‘Estia’ project. There­fore, we are cur­rently dis­cussing its prac­ti­cal im­ple­men­ta­tion,” Fran­gos said.

END OF AN ERA: The good part of the Co-op­er­a­tive Cen­tral Bank will even­tu­ally be ab­sorbed by Hel­lenic

GHOST FROM THE PAST: Co-op’s demise has re­vived fears of the Laiki de­ba­cle re­peated all over again

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