Audit report on CCB made public amid negotiations

An audit report on the Cyprus Cooperative Bank (CCB) was made public on Friday, amid negotiations between the Co-op and its two bidders, making recommendations for improvement but also criticising the institution on a number of decisions.

The report, which was written last year, recommended that the CCB moved at the soonest possible to restructure its administration model, citing issues within areas of administrative and auditing services.

One of the conclusions said that those issues, including shortcomings within the CCB leadership, reflect a number of problems in business planning and a failure to meet its own targets.

The audit office report also noted an increasing public disdain towards the Co-op following what it was described as an “unlawful decision” by the Finance Ministry to offer 25% of shares to individual bank clients.

It went on to say that the action by the ministry but also the bank itself appeared to have been premature without first allowing its auditors to examine the decision.

“This is unacceptable and it could potentially be a violation of regulations, besides the moral dimension which calls for a stricter approach towards the state, its civil servants and administrators,” the report said.

The bank was also criticised for not using best practices in matters relating to human resources, with the report saying that despite pressure to cut costs and increase profits, the institution made no changes in how it hired people, gave benefits, or even bought services.

CCB was also on the receiving end of criticism regarding its negotiations with Altamira Management Asset Management, in an effort to create a platform for handling Non-Performing Loans (NPL).

Report sees 'bad' negotiation tactics

The audit office took note that the bank executives put the institution in a bind when they proceeded with only one bidder for bad asset management, without allowing for alternatives.

“This puts CCB at a disadvantage and gives Altamira more power in the negotiations.”

Altamira Cyprus is known for being active in the management, enforcement and recovery of non-performing loans.

CCB and Altamira had launched an effort in 2017 to tackle jointly the NPL’s of the co-op, with Finance Minister Harris Georgiades praising the decision as a decisive step towards dealing with NPL’s.

In the meantime, the European Commission approved the acquisition of Altamira Cyprus by a joint platform with CCB and Apollo Capital Management.

Apollo is currently one of two bidding buyers, along with Hellenic Bank, negotiating with CCB their binding offers to acquire either a part or whole of the CO-op bank.

Teams from the two bidders are holding consultations on a number of issues, including the cost of the sale for the “good” part of the bank, as well as staffing and store branches.

Hellenic Bank, a Cypriot commercial bank, was the only bidder that openly showed interest in the “good” CCB only, that is without the co-op’s huge burden of non-performing exposures (NPEs) amounting to €6.2 billion, roughly 60% of its total loans.