By Elias Hazou
Parliament on Wednesday approved a fresh €200m capital injection to the already bailed-out Cooperative Central Bank (CCB).
Amid gripes that they lacked sufficient information to make an informed decision, MPs overwhelmingly voted to pass a package of five government bills, providing among others for the establishment of a recapitalisation fund for banks.
The items passed with 50 votes from ruling DISY, AKEL, DIKO, EDEK and the Greens, while the Citizens Alliance and the European Party voted against.
It is the second time since the banking meltdown of 2013 that the CCB is being recapitalised. In early 2014, the lender received a total of €1.5bn from the government.
The government will gradually recover the €200m through a special quarterly tax on deposits at Cypriot banks. Proceeds from the tax, to be levied until 2021, will go into the recapitalisation fund.
The CCB was found to have a €200m capital shortfall after a stress-test conducted by the European Central Bank’s Single Supervisory Mechanism (SSM).
Following their bailout, the co-ops are 99 per cent owned by the state. Effectively the new cash injection is being bankrolled by the other commercial lenders – the CCB’s very competitors.
The money collected from a levy on bank deposits, introduced in 2011, would have been enough to cover the Co-op needs but it has already been spent by the government.
Now, the levy will be kept in place even though from the start of 2016 the recapitalisation of all systemic banks in the euro-zone will be undertaken by a European body.
On the House floor, parties engaged in the all-too-familiar sparring and blame game.
AKEL leader Andros Kyprianou complained that parliament was “voting blind” as it was not given access to the SSM report on the CCB’s capital needs.
He accused the government and the ruling party of mismanaging the CCB and running it as their own fiefdom.
The co-ops must retain their character as the people’s bank, Kyprianou added. He revealed that early next year his party would submit a legislative proposal preventing the government from selling its stake in the CCB to private investors until the end of 2018.
In short, he was arguing that AKEL was grudgingly supporting the cash assistance to the CCB in order to stop the government from privatising it.
DIKO’s Nicholas Papadopoulos said the new cash injection proved false the government’s claims that it has overseen an economic “success story” in the wake of the 2013 crunch.
If this were true, he asked, why did the banks need extra capital for a third time.
EDEK MP Nicos Nicolaides observed that parliament was again being backed into a corner, as it had been when it was called upon in 2012 to recapitalise now-defunct Laiki Bank.
He wondered whether the €200m would be sufficient to ensure the viability of the co-ops. When queried about this, the government dodges the question, he added.
Of the government’s restructuring plan for the CCB, the Greens’ Giorgos Perdikis said it should be monitored by a parliamentary ad hoc committee as an additional safeguard.
Responding to the accusations, DISY boss Averof Neophytou told his fellow lawmakers that they knew full well that the CCB might require up to €2.5bn in state assistance, not €1.5bn.
