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Hellenic Bank:  First instalment for red loans

September 27, 2019 at 9:28am
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Hellenic Bank will submit the first claim for payment of potential loss that may be incurred by the €2.6 billion of former Cyprus Co-operative Bank’s red loans.

The first requirement relates to the period until June 30, 2019 and will be submitted within one month of the publication of Hellenic Bank’s results, that is, in October.

The results for the first half of 2019 will be released on the Cyprus Stock Exchange today. Essentially, loans from the former Co-op Bank were given to Hellenic Bank when the former collapsed and part of its good business was transferred to the latter. These loans are in the grey zone to qualify as serviced.

The Asset Protection Scheme was part of the deal to absorb the good assets of Co-op Bank and the validity of the agreement is 12 years. It was agreed that the balance of the loans would be reviewed annually and if any losses arose they would be submitted to KEDIPES for reimbursement.

The agreement includes control mechanisms such as data submissions with all requests for reimbursement to allow confirmation by KEDIPES as well as the operation of a joint monitoring committee (comprising from one member from Hellenic, one from KEDIPES and an independent officer).

There is also a mechanism for resolving possible disputes by using an arbitrator.

The Plan will cover potential losses in a nominal loan portfolio of €2.6 billion, with a defined ceiling for losses (90% for KEDIPES and 10% for Hellenic Bank). The loan portfolio is stable and does not change during the Plan.

Under the Loan Guarantee Scheme, Hellenic Bank undertook to repay the Government the guarantees granted. The first payment of the guarantee fee is expected soon and amounts to €15 million. The total guarantee fee to be paid by Hellenic Bank (in case it does not reduce APS loans based on the relevant option) will amount to €63 million.

The matter was referred to Parliament yesterday at the House Audit Committee’s meeting. A Treasury officer said that KEDIPES will submit its first Hellenic Bank claim in October. He recalled that as part of the sale of part of the former Co-op Bank’s business, a government guarantee had been granted to Hellenic Bank for the portfolio it received.

 

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