Hellenic Bank is duty bound are to respect terms and conditions of any loans or bond obligations they acquire via the takeover of the Co-op, said a leading banking executive.
The transfer of accounts and data from the Co-op to Hellenic is expected to be completed in September.
Andreas Kostouris, spokesman for the Association of Cyprus Banks (ACB), said that in the case of Hellenic’s acquisition it is legally obliged to keep to the terms agreed between the Co-op and its clients on loan agreements or a bond.
Co-op have voiced concerns over what will happen to the interest rates on their loans, bonds and savings accounts as they were agreed at different rates from Hellenic. Hellenic is taking on the largest portfolio of Cypriot deposits of any bank.
The ACB, told the Financial Mirror that according to the law, Hellenic has to respect the agreed terms and the interest rate on bonds and loans taken out by ex-Co-op clients.
Kostouris said that according to the law, if banks should wish to change the interest rates of loans and bonds issued by the CBC, they could not do so without the consent of the client.
A source close to the acquisition procedure, said that 90% of bonds issued by the CBC, for which HB is now responsible to cover, expire within a year, a period shorter than the integration period, during which no change in obligations towards Co-op clients is expected to take place.
Commenting on the fact that Co-op customers enjoy higher interest rates on their deposits than Hellenic, the source said that there will be no change affecting their accounts until the integration is completed.
“Clients are not expected to experience any immediate changes to their accounts. However, it is within banking practice to change interest rates from time to time, changes which affect all of its clients,” said the source.
On whether HB plans to respect interest rates given to people who borrowed money from the Co-op, the source said that Hellenic’s lending interest rates are, in any case, lower that those given by CBC.
“Housing loans given by the Co-op on average carry an interest rate of 3.6%, whereas Hellenic has interest rates as low as 2.3%.”
“The most important aspect of the matter is that any change carried out over the next period should not disrupt the transactions and lives of ex CBC clients, so as to obtain a smooth transition.” the source added.
Hellenic is to acquire along with CBC’s serviced loans and deposits, 73 Co-op branches, of which some will close, while some will be re-branded as Hellenic Bank branches. Changes to the branch network will take place during September.
HB will inherit some 1100 employees from the CBC, which are currently being paid significantly less than their future colleagues at Hellenic. The source said that there is no information available on whether employees joining HB from the Co-op are to receive a pay rise.
“I do not see them getting any pay rise upon joining HB, but they are to be include in the bank’s compensation and incentive schemes.”
Compensation scheme
Meanwhile, negotiations between the unions and the Co-op management over the compensation package has collapsed. Negotiations were expected to deliver an agreement on a voluntary retirement plan to convince some 900 Co-op employees to opt to leave the bank and not join HB.
Following a meeting between the two sides, which lasted over four hours, Cyprus Union of Bank Employees’ (ETYK) General Secretary, Christos Panagides announced a deadlock at the end of the meeting.
"From our part, we reiterated that we want an attractive voluntary retirement plan. One which will be voluntary, with no one being forced to resign," he said.
ETYK say that employees demand higher compensation than the €20,000 – €170,000 range put forward by management.
Following the deadlock, government spokesman Prodromos Prodromos clarified that if the 900 employees do not accept the voluntary exit plan, then the relative legislation provides for redundancies, stressing that the cost will be borne by taxpayers.
According to Prodromou, the government, as an employer in the Co-op, is offering employees a package of €125 million (in total) in compensation, “almost three times more of what they would get if made redundant.
On Friday, Finance Minister Harris Georgiades said: "The government's position is clear. There must be a reasonable plan within the financial capabilities of the Co-op and the successor entity”.
He hoped no ex Co-op employee “will be victimized due to unnecessary rivalry between trade unions".
