NICOSIA (AP) — Cyprus’ government on Friday approved Hellenic Bank’s multibillion-euro offer to take over troubled Cooperative Bank, an agreement the island nation’s finance minister hailed as “decisive” in overcoming past mistakes.
Finance Minister Harris Georgiades said that under the in-principle deal, Hellenic Bank will manage 9.7 billion euros ($11.25 billion) worth of client deposits.
Hellenic, which also is based in Cyprus, will also absorb 10.3 billion euros ($12 billion) in assets — including loans, bonds and cash — and operate 72 Cooperative Bank branches while employing 1,100 of its approximately 2,600 workers.
Georgiades said another 8.3 billion euros ($9.62 billion) of Cooperative Bank’s assets will be taken over by the state. The sum includes 600 million euros ($696 million) in bank-owned real estate, but also 7 billion euros ($8.12 billion) worth of bad loans.
Any revenue generated from those assets will go into public coffers, making the debt burden “manageable,” Georgiades said.
Cooperative Bank is 77-percent state-owned and the number one bank for domestic deposits in Cyprus. But it’s weighed down by bad loans, which represent nearly 60 percent of the total loan book.
The finance minister said the deal with Hellenic will allow the bad loans to be transferred to a separate management entity and out of Cyprus’ banking system, which nearly collapsed in 2013 before Cyprus accepted a three-year, multibillion euro rescue program from creditors.
In April, the government deposited 2.5 billion euros ($2.9 billion) into Cooperative to try to dispel the uncertainty over its future that prompted jittery depositors to withdraw hundreds of millions in savings.
“Certainly this is a difficult decision,” Georgiades said after a Cabinet meeting. “But any risks are dealt with decisively, and our economy’s stability and positive outlook is assured.”
He said the deal is subject to European Union approval.
By MENELAOS HADJICOSTIS , Associated Press