Cyprus Coop banks have strong capital, no fear of haircut

Cooperative credit institutions should continue their social role, said outgoing Cooperative Central Bank Director General Erotokritos Chlorakiotis, rejecting rumours of a haircut on deposits as part of an international bailout plan for Cyprus.
Chlorakiotis, who announced he is stepping down earlier than planned at the end of September, said the coop banks’ recapitalisation needs of 1.5 bln euros will be covered by the financial assistance programme agreed last March with the Troika of international lenders – EU, ECB, IMF.
The ‘bail in’ programme saw large savers paying for the capital needs of the island’s largest lender, Bank of Cyprus, through a 60% shares-for-deposits haircut, whereas Cyprus Popular Bank, the island’s troubled second largest bank with a a huge exposure to Greek debt is being liquidated.
The Troika programme calls for the island’s banking sector being reduced in size to about three times the GDP, while the number of cooperative banks should also be drastically reduced.
Chlorakiotis said that no haircut can be imposed in the CCIs as they had a capital adequacy ratio of 20.48% in 2012 and 26.15% until May 2013, whereas on a consolidated basis the capital adequacy was at 12.4% in 2012 and 12.57% in 2013.
"We do not have losses we did not proceed with investments which accumulated losses which could not be covered," Chlorakiotis said, noting that the CCB opted for depositing capital of 1 bln euros in the Central Bank of Cyprus which had zero yield in a bid "to shield our depositors."