The Cyprus finance minister says outflow has stopped at the state-owned Cyprus Cooperative Bank, following a €2.5 billion deposit by the government that is seeking private investors for the troubled institution.
Finance Minister Harris Georgiades said on Thursday that the government bonds amounting to €2.35 bn would join the stock exchange by the end of the day or the week following Easter.
The inflow at the Cyprus Cooperative Bank is part of a broader plan to eliminate uncertainty among depositors in the wake of the privatisation tender, launched last month where bidders would seek to acquire a controlling stake in the bank’s share capital, with 99% currently owned by the state, or acquiring assets and liabilities.
The process has generated uncertainty over the future of the Bank with some nervous depositors looking to withdraw their money.
But the bank run has stopped according to the minister, who was asked by reporters to assess the situation.
But the Cyprus Cooperative Bank is dragging along a huge amount of non-performing loans
“This is how it appears to me,” he said.
Estimates put the cash outflow at around €100 million.
The government said earlier this week that the cash would “shield” the bank and secure the stability of the banking system in Cyprus, adding that the move would put to rest “irresponsible rumours” that were causing concerns among depositors over the future of the bank with private investors in the game.
But the CCB is dragging along a huge amount of non-performing loans (NPL), which has been restricting growth for years.
The Cyprus government says it is depositing €2.5 billion at the Cooperative Bank of Cyprus, as part of a broader plan to eliminate uncertainty among depositors in the wake of a privatisation bid.
Georgiades, who had a meeting with Green Party MP George Perdikis, said that he saw some common ground with the House member despite a difference of opinion in how to approach a number of issues.
“Some issues and decisions are based on the reality of taking into consideration how we operate as a country, our banking system, in a European environment, where demands by European authorities are strict and very specific, which set the agenda to a certain extent on how things develop,” the minister said.
Georgiades said he thought “it is possible for us to find solutions that would benefit the economy and Cypriot society at large, which would minimise negative effects while also creating potential,” adding that denationalisation of the CCB could provide some opportunities in the area of dealing with NPL’s.
Concerns over CCB privatisation
But Perdikis appeared to be unconvinced in terms of how the government has been dealing with the issue, expressing his concern over the developments with Cooperative banking.
“What bothers us the most is that we have entered a process that is taking us, with mathematical precision, to a forced alienation of property,” Perdikis said.
The Green MP, however, repeated his party’s readiness to work constructively with the minister on matters regarding NPL.
The CCB leads in the amount of deposits held by Cypriot depositors, but it is being held back by €6 billion worth of bad loans, which account for 60 percent of its loan portfolio.
The government expects that one option for the bank is for a private investor to acquire some or all of the share capital, with the state`s share falling as a result. Another option would be the acquisition of assets, in particular bad loans, which would reduce or eliminate the bank’s NPL burden.
Cyprus has rebounded from a financial crisis that peaked in 2013, when the country secured a €10 billion euro bailout from international lenders on conditions it would apply more prudent measures and reforms, leading to the island’s exiting the bailout in 2016.