Constantinos Liras, Commissioner for the Cooperative Societies’ Supervision and Development authority, said that by having the right to issue shares, co-ops would be able to better run their finances in the future.

Parliament on Thursday approved government-drafted legislation making it mandatory for cooperative credit institutions to issue shares for the purposes of raising capital, converting them from unlimited liability to limited liability companies. Liras said that rather than having to undergo this step separately for all 92 co-ops, the move expedited the process, paving the way for “better-run, more modern” bodies.

Future steps include rationalising expenses, and merging smaller co-ops into bigger bodies, Liras said.

Under Cyprus’ memorandum of understanding (MoU) agreed with its international lenders, cooperative credit institutions are to fall under the regulatory supervision of the Central Bank and are expected to “seek private sector participation no later than 31 July 2013”.

The Central Bank in consultation with the island’s lenders will “design a strategy for restructuring and recapitalising the sector” including the possibility of mergers. Any institutions needing state aidmay only be recapitalised after their restructuring plans are formally approved under state-aid rules, the MoU says. Cash necessary for recapitalisation purposes is due to be drawn from the €10 billion bailout aid that Cyprus has secured from its lenders.

Source: Cyprus Mail