The state will soon become the largest shareholder in the co-operative banking institutions, but the latter will have the right to be the first to buy back their shares after a transitional period of five years, said Chlorakiotis. “The co-operative movement is sufficiently strong and will soon be in a position to regain its shares,” he added. Finance Minister Harris Georgiades said yesterday the government would spend around €1.5 billion of the €10 billion international bailout to buy shares in the co-operative movement so the latter could meet its recapitalisation needs.

The state was effectively using taxpayers’ money to save the co-op banks from going bust, he said. In turn, depositors will be saved from a ‘bail-in’ as experienced by depositors in the Bank of Cyprus and former Laiki. The co-ops will receive the money after the disbursement of the second tranche of the Cypriot bailout programme, pending approval of the Eurogroup on September 13. The move will make the state the exclusive owner of the co-operatives, acquiring 99 per cent of its shares. Georgiades explained the share purchase would not be in the form of a loan accruing interest annually. As the exclusive owner and shareholder, the state will not get interest on the €1.5 billion, however any profits made will belong to the state, as will any losses.

Speaking to reporters yesterday, Chlorakiotis expressed confidence that the state would not sell its shares in the co-op movement to others in the private sector, but will give the movement a chance to get back on its feet and buy back its shares from the state. In any case, he argued, the state owes the co-ops €2 billion; around €1 billion in state bonds and the rest in loans either towards the state or to local authorities but with state guarantees. Georgiades countered that these were separate issues that were not related. Chlorakiotis also noted that mergers will take place to reduce the number of co-ops from 93 to 18, meaning a “substantial number” of branches would have to be closed. The restructuring plan would be submitted at the end of September to the Central Bank of Cyprus and to the finance ministry as the largest shareholder. The outgoing chief said the aim of offering a voluntary early retirement scheme was to reduce the need for a large number of redundancies.

An article by online news site Stockwatch last month revealed that the early retirement plan included extremely favourable terms for outgoing staff, far over and above what their colleagues in the Bank of Cyprus are currently negotiating for. Under the proposed co-op plan, employees with 15 years of service under their belt, and approximately the same number of years left to go until retirement will get 41 times their salary as compensation for early retirement, counting for approximately three and a half years of earnings. However, before the scheme can be brought into effect, it will likely need the approval of its new owner next month, the state, and by extension, the taxpayer. Chlorakiotis yesterday noted that consultations were still needed on various technical issues like the dividend that the co-operative movement will pay to the state, which will be discussed at a political level, he said.

Source: Cyprus Mail