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European Central Bank wants access to operational plans after CCB deal

June 4, 2018 at 12:12pm
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Negotiations for the acquisition of the ‘good part’ of the Cyprus Co-operative Bank by Hellenic continue, with the main obstacle remaining the amount of capital that will be required.

Last week, negotiations with Citigroup Global Markets Limited (“Citi”), the Co-operative Banks’ exclusive financial adviser, focused on analysing, recording and explaining all data so that each side can have a complete picture. There is, however, disagreement regarding the extra capital required: Hellenic Bank’s estimates that capital needs may reach some €230 million. However, the European Supervisory Authorities need proof of sufficient funds. According to its balance sheet for the first quarter 2018, Hellenic Bank is required to maintain, for the year 2018, on a consolidated basis, a capital adequacy ratio of 13.075%. The index should not fall below this threshold after the acquisition of CCB.

There are also differences regarding the cash deficit resulting from taking over the deposits and loans of CCB. That is, if the state will cover the difference with the issue of a new bond that will, again, burden taxpayers. As the amount needed has not been clarified, it remains unclear what role Atlas, Flowers and Pimco Funds will play in the process. The three funds are understood to have indicated they are ready to  invest in Hellenic Bank, provided they were to be given a significant role in the Bank’s management.

The ECB does not hide its concerns as to what may happen after the acquisition of CCB. EU technocrats are interested in a smooth transition after the absorption of the ‘good’ part of CCB. It will have to be made clear how many employees will leave and how many branches will close. In practice, this means how many Co-op branches will continue to operate, after absorption the deal. A transition period will be needed, and supervisors seem to want this to be as short as possible.

It is worth noting that the deadline originally set for the selection of the private investor to buy the Co-op was May 31. However, due to the problems raised during the negotiations, this was not adhered to.