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Rift continues between Central Co-op Bank and state

Relations between the Audit Office of the Republic and the management of the Cooperative Central Bank (CCB) as well as between the Commissioner for State Aid Control and the Finance Ministry remain tense.

Persistent problems were highlighted during a Monday House Watchdog Committee meeting where stakeholders discussed the issue of free shares and the Bank’s decision to work with Spain’s Altamira Asset Management in a joint venture for the management of the lender’s NPLs (€7.2 billion) and real-estate (€0.4 billion) owned assets.

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The Cabinet at the end of May decided the state will give 25% of its CCB shares for free to the customers of the CCB.

During the meeting, Auditor General Odysseas Michaelides requested that minutes be kept and, if necessary, be used to assign responsibility in future. He also accused the Cooperate Bank revising its performance indices because they were out of reach.

Referring specifically to the performance indicators related to the Audit Office, he also said they had failed their goal.

Michaelides noted that the CCB’s valuation had been significantly reduced since the € 1.7 billion taxpayers’ contribution towards supporting the co-operative banking movement. He noted that within eight months, the Cooperative Bank’s valuation had decreased by €350 million. In 2013, the Cooperative Bank had a negative position of about € 300 million.

Moreover, he called on the Cooperative Central Bank’s management, which, he said was well remunerated, to do more to do their duty and increase the value of the credit institution.

The Auditor General also accused the management of the CCB of refusing to cooperate with his Office by providing selective data and not all the minutes of the meetings concerning the decision to cooperate with Altamira.

Michaelides added that his Office has prepared a special report and that he was willing to verbally but not in writing present the report’s findings to the House.

CCB Chairman Takis Taoushanis and General Manager Nicholas Hadjiyiannis have defended the institution’s performance, noting that it was a collective of bodies that had been made into a bank and that a bank cannot be built in a day.

They also said information had never been deliberately withheld from the Auditor General and defended the CCB’s finances.

The Commissioner for State Aid Control, Theophanis Theophanous, also expressed dissatisfaction towards the Finance Ministry during the Committee meeting.

Theophanous said he was being ignored by the Ministry giving the previously planned privatization of the Cyprus Telecommunications Authority (Cyta) and the commercialisation of Cyprus’ ports as examples.

“This tactic is followed continuously by the Ministry. It is disrespect for the institution. They want this institution or they don’t. I did not accept this position to be a ‘karaghiozis’ (in this context something like a clown). I am a state official and I demand respect, “he added, adding that he would appeal to Attorney General Costas Clerides over the matter.

The CCB’s Supervision Director Yiangos Demetriou, meanwhile, warned that the institution should be allowed to implement its decisions to reduce non-performing loans.

If this is not done, he warned, “There may be nothing left for the Commissioner for State Aid Control and Auditor General to discuss”.

Finance Minister Harris Georgiades responded to Commission Theophanous’ concerns, saying that the government of the Republic of Cyprus has been granted a written approval by the EU Competition Commission the free distribution of the CCB shares held by the government.

“If he is troubled by this, it’s the Commissioner’s problem,” said Georgiades. “If he thinks there is a conflict with EU terms, let him ask the European Commission,” he added.

Georgiades also said the state was determined to move ahead with its plans to hand over its shares in the CCB but said that this would likely occur close to or even in parallel with the bringing in of a strategic investor.

He also revealed the matter had been discussed with Cyprus Central Bank chief Chrystalla Georghadji.

Demetriou, meanwhile, revealed that it was Georghadji’s suggestion a strategic investor be found before the shares be distributed.

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