Executive says mission to save Co-op was impossible

By Stelios Orphanides

A Co-op executive told the committee investigating the failure of the Cyprus Cooperative Bank that the lender could have made it if conditions had been less adverse, the Cyprus News Agency (CNA) reported on Thursday.

The Co-op had to struggle with its legacy, the nature of its portfolio and the fact it was government-owned, all combined with the institutional framework which prevented it from producing better results, said Yiannos Stravrinides, head of communications and strategy, told the committee appointed by Attorney-general Costas Clerides, according to the CNA.

A decrease of the bank’s non-performing loans of around €7bn which could have allowed the bank to stay in business, was the bank’s top priority, he said.

“All the Co-op’s ammunition was spent there but it had the worst among bad portfolios, with an average retail loan of €115,000,” he was quoted as saying. “The bank’s division managing arrears had 120,000 accounts to restructure, had all people’s homes as collateral and had some laws that weren’t helpful”.

The strategic aim was organic restructuring as the bank could neither auction nor recover via foreclosures given its business model of ethical banking, Stavrinides said. While the bank could have resorted to foreclosures more often, there was no framework or will to do so as public opinion objected, he said citing reactions to the bank’s agreement with Spain’s Altamira a year ago, which provided the management of the Co-op’s delinquent loans portfolio by a joint venture, as well as reaction from political parties to the bank’s decision to reduce its branch network.

“It’s not easy, it was a very difficult environment and the public support made things worse,” Stavrinides said in reference to the bank’s recapitalisation with €1.7bn from the taxpayer. “That public support had to disappear”.

Stavrinides said that the foremost concern of the bank which saw an outflow of deposits triggered by rumours about its failure that set off late last year, was the protection of its depositors.

“I feel particularly proud that depositors have were transferred to Hellenic Bank in the same capacity,” he said in reference to those of Bank of Cyprus who were bailed in in 2013 and became shareholders.

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