Newsroom / CNA
The privatisation process launched by the nationalised Cooperative Cyprus Bank may lead to the creation of an Asset Management Company (AMC) also known as a bad bank which will manage non-performing loans, Finance Minister Harris Georgiades said.
The government launched on March 19 a privatisation process offering two options either the acquisition of the banking entity as a whole or the acquisition of assets (mainly loans) liabilities as well as part of the bank’s branch network.
According to the CCB, the process attracted “significant investor interest” both from financial entities in Cyprus and abroad. In case an investor acquires the performing part of the bank, the CCB may be transformed to an AMC to manage the bank’s non-performing loans that amounted to €6.4 billion in end-2017 - 60% of its loan portfolio. The process is expected to conclude by the end of April.
On Tuesday, the Finance Ministry deposited €2.5 billion in the CCB to allay fears over a bank run in the bank, created by the uncertainty triggered by the privatisation that saw an outflow of around €100 million.
The deposit was made possible through the issuance of bonds amounting to €2.35 billion and cash amounting to €0.15 billion. In return, the state received the bank’s non-performing loans and other holdings amounting to €7.6 billion as collateral.
“Depending on the developments, opportunities may arise for actions such as the AMC "
“Depending on the developments, opportunities may arise for actions such as the AMC which despite the challenges and the cost is estimated to provide prospects and space,” for the management of bad loans, Georgiades said.
Asked on the impact of the bond issue to Cyprus’ public debt, Georgiades said the impact amounts to €2.35 billion but did not provide figures as to Cyprus’ total public debt and debt to GDP ratio following the bond issuance.
But he noted that Cyprus’ net debt will not be impacted as this money have not been spent and are deposited as cash reserves thereby maintaining net debt unaffected.
Georgiades added that the developments in the CCB kickstarted mainly due to the supervisory environment.
“We are operating in a European environment with strict and specific supervisory rules, which to a large extend drive the developments,” he said.
Furthermore, the Cyprus Stock Exchange announced it accepted the flotation of the bonds issued by the government to the CCB. These are nine bonds with maturities ranging from 15 to 20 years with yields starting at 2.45% and reaching 3.05%.
