A former co-op official said on Monday that Cyprus’ political elite discouraged reforms in the co-operative banking sector because local co-ops were controlled by political parties which allowed them to operate for years without complying with minimal corporate standards.

This control reflected the leverage of the political parties in local communities, said Panayiotis Philippou, a former board member and chairman of the board of directors, according to the Cyprus News Agency.

Philippou was testifying before the committee appointed by Attorney-General Costas Clerides to probe the breakdown of the state-owned Cyprus Co-operative Bank into which taxpayers pumped €1.7bn in the form of two capital injections in 2014 and 2015.

The co-op supervisor — until 2013 the Authority for Supervision and Development of Co-operative Societies (ASDCS) — showed leniency towards the increasing problems the co-ops were facing, he said. Co-operatives that were not operated by members of professional groups lacked strict rules while exemptions from breaking the rules were common.

Philippou singled out the co-ops of Polemi, Stroumpi, Achna and Ayia Napa in particular.

The problems at the co-op, he continued, could not be resolved because it was impossible to fire the secretariat or the board of a co-operative.

When in 2008, 118 independent co-operative credit institutions came under the “Central Agency”, giving them a lender of last resort, most of the co-operatives had practically little if no structures to internally monitor their operations, he said.

Back then, only 12 co-operatives had internal audit systems, 28 showed weaknesses, while the rest 78 had no internal audit mechanisms, he said. While 35 co-operatives were unable to produce annual accounts, 58 did not even have an accountant.

Every year, the Co-operative Companies’ Audit Service included all these irregularities in its reports filed to the ASDCS and the respective minister of commerce, in charge of the co-op’s affairs, before the latter forwarded them to the parliament’s (commerce) committee, Philippou said. He added that he believed that past ministers of commerce were aware of the situation.

Decisionmakers carried out a merger in 2012 to 2013 which ultimately reduced the number of co-operatives from 118 to 93, in order to cover up mismanagement, he said and named as an example the Ayia Phyla co-operative which was rocked by the revelations of a fraud case three years ago.

In some cases, co-operatives even extended loans to dead persons after they were presented with forged ID cards, he said.

While co-operative banks serving specific professional groups had a lower non-performing loans ratio, they were forced to merge with other co-operatives to reduce the average ratio which ultimately meant that they too fell victims to the overall mismanagement, he said.

Philippou said that in 2012, when Cyprus requested an international bailout caused by a combination of undercapitalised banks, an exploding deficit and recession, and the co-ops (equity) deficit was estimated in the range of €1bn to €2.5bn, there was no willingness in the bank to put reforms forward while some were proposing promotions.

Philippou said that he returned to the co-op in 2015, three years after leaving out of love for the bank and in order to contribute.

Another member of the board, Gregoris Maliotis, who served from June 2010 until October 2013, also testified at the committee on Monday. He said that co-operative credit institutions operated completely independently and uncontrolled while reports prepared by the Central Co-operative Bank had no effect.

According to the CNA, Maliotis said that while it was unclear who was in charge of imposing penalties in cases of irregularities, there was also a secret agreement and unwritten law of not subjecting the secretariats of the co-operatives to sanctions.

When asked whether he had considered resigning in protest over his proposals concerning the introduction of audit procedures and sanction in cases of non-compliance, he said that he opted to stay and struggle.

Maliotis said that serious criminal cases such as those in Ayia Napa, Stroumpi, Ayia Phyla should be directly referred to the police.

He added that the Central Co-operative Bank did not have a clearly defined role to carry out audits at the cooperatives and report to the supervisor.

Cooperation with the supervisor was not a two-way street and as a result it was the board that was informing the supervisor and not vice-versa he said.

Auditor-general Odysseas Michaelides said on Monday that Finance Minister Harris Georgiades publicly lied and misled the both the council of ministers and the bank’s supervisor over the donation of Co-op stock to the its customers.

The European Central Bank’s (ECB) Single Supervisory Mechanism (SSM), which together with the Central Bank of Cyprus supervised the bailed out state-owned bank, had dismissed the idea of allocating stock to the customers, Michaelides told the committee investigating the demise of the Cyprus Cooperative Bank, according to the Cyprus News Agency.  The idea had first been tabled by Georgiades in 2016.

Georgiades “had a letter from the supervisor listing 1,000 reasons why he should forget this matter, had (also) a letter from the Central Bank of Cyprus, and he still lied publicly that (it) was not conflicting with supervisory requirements,” which included additional €1bn in capital, Michaelides said. “I believe that this serious delay in taking action was the basic reason why the Co-op failed.”

It was the second part of the deposition of the head of the government’s Audit Office, after he had accused the finance ministry on Thursday of resorting to blackmail to bar his agency from auditing the lender. The committee was appointed by Attorney-General Costas Clerides.

Michaelides presented correspondence as exhibits related to the bank’s initial plan of tapping €200m in private equity as part of a capital increase which referred to expected losses of up to €1bn at the Cyprus Co-operative Bank.

The Co-op, which in June agreed to sell its healthy operations to Hellenic Bank after it failed to reduce its non-performing loans (NPLs) stock fast enough, has not produced yet accounts for the financial year 2017. Its NPLs account for six tenths of its total loan portfolio.

“When the ship was sinking, even in May 2018, they were still preparing notes about the free of charge allocation of shares,” Michaelides was quoted as saying. “This is proof of amateurism, superficiality, incompetence and stubbornness in the handling of a serious matter, which though it did not materialise and therefore had no consequences, was a distraction from the ultimate goal which was finding equity.”

This may have been “an attempt to save face if they had to admit that their idea was wrong,” he said.

A note prepared by Dionysis Dionysiou, a finance minister official who oversaw the government’s investment in the bank, dated November 2016 and sent to the finance minister, says that the European Commission warned that in case the bank needed additional capital and failed to have its stock listed at the stock exchange or the bank was not attractive to investors, a bail-in would be the only option.

The chairwoman of the SSM Danièle Nouy expressed in June 2017 her disagreement with the minister’s intention to hand over shares of the then struggling bank which would have been detrimental, as well as her disappointment over the bank’s unacceptably unambitious target setting, Michaelides said. Nouy had said that introducing new capital and expertise was both critical and urgent.

Two months later, in August 2017, Dionysiou prepared another note, this time to the permanent secretary of the finance ministry ahead of a meeting of the parliament’s watchdog committee. He wrote that the number one challenge the bank was facing was implementing a listing on the stock exchange based on the cabinet’s decision, which provided for the donation of stock, Michaelides said.

“Even after the supervisor told them that it would be disastrous, he prepared a note saying that the foremost challenge was to implement the cabinet’s decision,” Michaelides exclaimed.

Georgiades then misled Nouy by letting her know in November that the idea to donate stock had been shelved, “while the minister was forwarding draft bills to the Attorney General about the stock grant”, the auditor said.

Nouy warned that the situation in the meantime had deteriorated at the Co-op both in regarding corporate governance and non-performing loans and as a result the bank would need more than €200m initially estimated in private equity, Michaelides said.

Dionysiou said in a note to the minister on January 3, 2018 that the SSM’s in situ inspection was going to show that “the situation is worse than that reflected in data and that the attempt to find an investor will fail” as the capital requirements were in the range of €500m and €1bn, he continued.

“He (was the) one who was telling in a note to the council of ministers that everything was well,” he exclaimed again.

On March 13, just six days before the Co-op announced its decision to sell its assets, Georgiades complained to the Central Bank of Cyprus about the SSM’s “extreme assumptions” in calculating the Co-op’s capital needs, just to receive a response from governor Chrystalla Georghadji that the Co-op’s representatives did not contest the assumptions in an earlier meeting with a delegation of SSM, the auditor said.

Michaelides also said that the way the bank’s chief executive Nicholas Hadjiyiannis, the bank’s former chairman and childhood friend of Georgiades, who was appointed under questionable circumstances, acted in the selection of Spain’s Altamira for the handling of the Co-op’s €7bn in non-performing loans was “flawed and unacceptable”.

He added that Hadjiyiannis may have been inept “beyond description” when he was publicly saying that the Co-op had met its targets and would need additional capital only if it decided to change its plans on the management of the non-performing loans, when the supervisor was saying that they needed up to €1bn in fresh capital.

Hadjiyiannis’s actions led to the Co-op ending up having only one option to choose a partner to negotiate the management of its delinquent stock, the auditor said.

“It looks like Hadjiyiannis played a defining role in leading the Cyprus Co-operative Bank to having Altamira as the only option and there are negative comments made also by the (bank’s former) chairman (Christakis) Taoushanis about his role,” Michaelides continued.

He also alleged that Hadjiyiannis, before joining the Co-op first as chairman, had left Bank of Cyprus after the latter had initiated a disciplinary probe against him. When asked by the committee how he got the information, Michaelides said that he received it from a reliable source. He did not disclose the source but clarified that it was not Hadjiyiannis’s predecessor Marios Clerides who told the committee on August 3 that there were rumours about Hadjjiyiannis’ departure from Bank of Cyprus.

Altamira, which started managing the bank’s bad loans in January after the Co-op entered their agreement a year ago, is failing to meet its targets, he added, citing a document prepared by Dionysiou. The actual reduction in non-performing loans is €300m below that of the target while the reduction of loans in arrears for 90 days or more is €60m below, he said.

The government’s chief auditor said that the finance minister is also to blame for approving the deal with Altamira which the shareholders passed in a general meeting.

“I don’t believe that the finance minister’s responsibility concerns the final approval, but the fact is that he knew via Dionysiou very well of what was happening, and should have intervened,” Michaelides said. “The final approval he gave shows that he could have had a say.”

Dionysiou, Michaelides added, while being on the finance ministry’s payroll, also got paid by the Co-op for participating in board meetings as observer.

“That person whom the parliament placed in charge of approving the board’s decisions, was getting a €25,000 baksheesh every year on top of his salary,” he said.

In addition to his annual salary and the remuneration from the Co-op, the finance ministry official also got another €6,000 in 2014, €5,754 in 2015 and €11,000, in the form of allowances from the ministry.

Lastly, Michaelides said that the finance ministry requested in 2015 from the Co-op to write down loans and other favours including, restructuring and grace periods, in the case of 54 loans of communal councils, municipalities and various individuals, which violated the principle of the government staying out of the management of the Co-op.

The justice ministry on Monday launched a public consultation for a new bill on legal recognition of gender identity – the first stage in a long process before the bill can become law.

The bill proposal provides for the right of any person over 18 who feels that their gender identity is not that stated in official documents to request a correction of their registered gender. They would simply submit a form without having to undergo any surgery, medical examination or receive medication “concerning their physical or psychological health”.

In the case of minors, this would be possible through their parents or guardians who need to file the form and after a court order.

The court could issue the order for correcting the gender of a minor after it receives the green light by a committee comprised of a social worker, doctor specialised in gender identity matters and a psychologist. The parents would also have to verify that their child is in a position to make such a decision of its own free will and in full knowledge of the consequences.

Applicants may also state if they wish their name to be changed. If their request is accepted, they will receive a new birth certificate with the changed gender and name. They will also be able to obtain new documents such as identification card and register in electoral lists with the changed information.

If their application for gender identity change is rejected, applicants may appeal to the justice minister.

Where applicants are parents, the change in their details “does not cause any change in the birth certificate of their children or any documents issued for children or records, registers or lists of children.”

The bill also provides that court decisions of other countries concerning gender identity changes would be recognised by Cypriot courts.

To-date there is no gender recognition law in Cyprus. The bill in question was a demand by Accept-LGBT Cyprus but also MPs. The promotion of the issue of the legal recognition of gender change has also been brought up by the Council of Europe.

The House human rights committee heard last May that four applications from transgender people who want to change their identification papers because of a sex change have been pending before the interior ministry since last November because Cyprus lacks the necessary legislation to make that possible.

The heads of the Disy, Akel, and Diko political parties have already expressed their support for the legal amendment, which however, has still a long way to go before it is tabled to the House plenum to vote.

The public consultation is just the first step in a long line of procedures, as the revised proposal including suggestions of the public and groups must first be sent to the legal services for vetting, then to cabinet for approval and then to the competent House committee for discussion.  Only after discussion is completed at committee level will the final bill proposal be tabled to the plenary to vote.

Anyone wishing to submit their suggestions may do so by September 17 at atsiartas@mjpo.gov.cy or send a fax at 22 518356.

The bill proposal (Greek only) may be found at: http://www.mjpo.gov.cy/mjpo/MJPO.nsf/All/770B707519F125DCC22582F600446B7E?OpenDocument

By Stelios Orphanides

Bank of Cyprus said that it generated a net loss of €55.8m in the first six month of the year compared with a €553.4m loss the previous year and that it agreed to sell a large amount of its non-performing loans portfolio.

The reduced loss resulted mainly from a decline in expected losses from loans and advancements to customers from €750.9m in the first six months of last year to €267.7m this year, partly offset by a reduction in net interest income from €316.3m to €249.4m, the bank said in a statement on Tuesday. The bank’s turnover fell to €550.7m in the first half of the year from €606.2m the previous year.

The sale of its loans, the largest announced so far in Cyprus –dwarfing Hellenic Bank’s €145m deal with B2Kapital made public in January–, involves the transfer of mainly non-performing loans with a contractual value of €5.7bn in a gross book value of €2.8bn to the licensed Cypriot Credit Acquiring Company (the “CyCAC”), the bank said in a separate statement. The net book value of the loans put on sale as part of ‘Project Helix’ is €1.5bn as of June 30, which affects “14,024 loans to corporate and small and medium size enterprises (SME) borrowers, secured over 9,065 properties”.

Funds affiliated with New York based Apollo Global Management LLC will subsequently acquire CyCAC’s shares for consideration of €1.4bn in cash, the bank said.

“The deconsolidation of the portfolio from the bank’s balance sheet is expected to have a positive impact on the bank’s capital ratios of circa 60 basis points. The accounting loss attributable to the transaction reported in the second quarter of 2018 is estimated at €135mn, declining to circa €105m by the year end, as time value of money of circa €30m unwinds,” it added.

Helix and the sale of the bank’s UK subsidiary agreed in July for a total €117m is expected to improve Bank of Cyprus’s core equity tier 1 (CET1) capital ratio of 11.9 per cent at the end of June by a total of 140 basis points, it said. The fully-loaded CET1 ratio based on International Financial Reporting Standards 9 (IFRS9) stood at 11.5 per cent.

Total equity fell in June to €2.2bn from €2.6bn in December, Bank of Cyprus said.

The lender, the island’s largest, said that its non-performing loans stock declined in the first six months of the year to €7.9bn from €8.3bn in March or to 43.2 per cent from 44.9 per cent respectively. Restructured loans showing no arrears fell to €1.4bn from €1.5bn also respectively. The figures do not take into account Helix asset.

By the end of June, the customer deposits of Bank of Cyprus rose to €18.4bn from €17.8bn at the end of December, it said. Total loans to customers fell to €13bn from €14.6bn, while non-current assets held for sale rose to well below €1.5bn from €6.5m respectively.

The loans-to-deposits ratio of 77 per cent at the end of June is expected to drop to a pro  forma 68 per cent as a result of Helix and the sale of the bank’s UK subsidiary, it said.

“Overall, the group has recorded significant organic non-performing exposure (NPE) reductions for thirteen consecutive quarters and expects the –post Helix– organic reduction of residual NPEs to continue during the coming quarters at a revised pace of circa €200m per quarter, as portfolio size and business line mix (are) expected to change radically,” the bank said. “Following the completion of Project Helix, the bank’s gross NPEs will be 6 per cent lower than its peak in 2014”.

Bank of Cyprus was the first lender to set up a specialised restructurings and recovery division immediately after the 2013 bail-in and has showed the fastest decrease in non-performing loans in the banking system. In March, the Cyprus Cooperative Bank became the first casualty in the Cypriot banks’ struggle against delinquent loans which account for almost €20bn or around 43 per cent of the total.

The bank also announced on Tuesday the intention of its board chairman Josef Ackermann to step down at the shareholders’ annual general meeting in 2019 after completing two terms.

“When I was first asked to take my position with the Bank of Cyprus I committed to stay for three years,” the Swiss banker was quoted as saying. “Now, almost four years later, with a strong board and executive management team, major strides have already been made in restructuring the bank and in formulating appropriate reform strategies. It may thus be a suitable time to give an indication of my intentions, as part of the bank’s prudent governance practices”.

Deutsche Bank’s former chief executive was also in the board of directors of the Swiss subsidiary of Renova Group, linked to Russian billionaire Viktor Vekselberg.

Both Vekselberg, owner of a 9.3 per cent stake in Bank of Cyprus and Renova, were targets of US sanctions announced in April which came in response to Russia’s alleged meddling in the US presidential elections in 2016.

“The exploration of a suitable candidate to succeed Josef Ackermann will be addressed by the nominations and corporate governance committee in due course,” Bank of Cyprus said.

The bank’s share which opened at €2.325 on Tuesday gained more than €0.10 in the afternoon.

The bank’s top executive John Hourican, who earned €2.1m last year, has agreed to stay at the helm of the bank until 2020 after joining in 2013, the year in which it was recapitalised with customer deposits, said that the results show that it is making progress towards repairing its balance sheet.

“Post quarter-end corporate transactions accelerate this repair and deliver value to our shareholders,” he was quoted as saying in reference to Helix, which he described as “very meaningful” both for the bank and the island’s economy.

“Helix is expected to further reduce NPEs by €2.7 bn to €5.2 bn, representing an overall 65 per cent or €10bn reduction since their peak in 2014 and is expected to improve our NPE ratio by circa 10 percentage points, whilst maintaining coverage at circa 50 per cent,” he added.

Hourican said that the bank, which fully repaid in January last year the remaining emergency liquidity it inherited from Laiki Bank in 2013, now has a “significant” liquidity surplus of €1.4bn after it extended €1.3bn in fresh credit in the first six months of the year.

By Evie Andreou

Turkey is planning to establish a sovereign naval base in the north of the island, it was reported on Tuesday.

According to Turkish daily Yeni Safak, Turkey’s navy has submitted a proposal to the ‘foreign ministry’ in the north for the establishment of the base.

Such a base in the north would ensure guaranteeing the ‘sovereign rights’ of the breakaway regime, the daily said, but also the rights and interests of Turkey in the eastern Mediterranean.

A naval base would also reinforce the position of the ‘Turkish Republic of Northern Cyprus’ and Turkey at the settlement negotiations and it could take measures to prevent actions concerning offshore energy areas.

Turkey and the Turkish Cypriot side oppose Cyprus pursuing its energy plans in the island’s exclusive economic zone and have laid claim to a number of drilling blocks.

A proposal for the establishment of a naval base in the north by Turkey was first put on the table in 2009 after the creation of the Andreas Papandreou airbase in Paphos in 1998 and the signing in 2000 between Cyprus and Greece of a joint defence doctrine, the Turkish daily said.

If there is a decision to implement this measure, Yeni Safak said, Turkey would establish a sovereign naval base in the north like Britain has establishment two bases in the south of the island in 1960.

A Turkish naval base in the north would also offset the influence of Greece and Cyprus in the region, the daily said, as the two counties are forging cooperation and partnerships “to dominate over the Mediterranean energy fields.”

The eastern Mediterranean has become one of the most critical regions in the world in terms of energy and military security, the daily said, and given the strategic position of Cyprus, Turkey is taking its measures in view of the developments expected in the coming years in the region.

It said that western powers, especially the United States and Britain, had increased their military presence in the eastern Mediterranean due to the war in Syria while Russia, France, Italy, Germany, Belgium, Spain, Canada, Portugal, Greece, Denmark have anchored their war ships in the region too.

It added that Turkey does not have an air base in the north either and that efforts were underway to meet the Turkish army’s needs using the civilian airport at Lefkoniko, which is currently closed.

According to Yeni Safak, Lefkoniko airport was used in the past by Turkish air force on their way to Cyprus, but it is still closed due to obstacles. One of the problems that must be addressed if the airfield is to be used as an air base the daily said, is the high-voltage power lines installed in the area.

Former Cyprus Cooperative Bank board member Lampros Pieri on Tuesday said the Co-op fell victim to European aversion to state-owned banks, while former chairman Giorgos Iosif said the 2013 economic crisis was to blame.

Meanwhile, a third person testifying, former board member Andreas Charitou said the bank went down due to a combination of bad governance and party interests.

Pieri, who was testifying at the committee probing the collapse of the cooperative banking sector, said that “supervisors in Frankfurt didn’t want a state-owned bank to exist,” the Cyprus News Agency (CNA) reported.

The Cyprus Cooperative Bank, the first casualty in Cypriot banks’ struggle to reduce their non-performing loans, jointly supervised by the European Central Bank’s (ECB) Single Supervision Mechanism (SSM) and the Central Bank of Cyprus was forced to sell its operations to Hellenic Bank in June after it failed to reduce its bad loans fast enough.

SSM chairwoman Danièle Nouy declined the Co-op’s request to delay an onsite inspection until the bank had completed its efforts to increase its capital, Pieri said. On Monday, Auditor-general Odysseas Michaelides said Finance Minister Harris Georgiades had complained to Central Bank of Cyprus governor Chrystalla Georghadji about the SSM’s “extreme assumptions” in calculating the Co-op’s capital needs, only to get a response from her that the bank’s management had not contested them in a previous meeting with a delegation from Frankfurt.

The SSM and part of the Central Bank of Cyprus, Pieri continued, wanted to settle the issue outside the bank by taking a large portion of the Co-op’s €7bn hence “the crisis occurred”.

Iosif, also testifying at the committee, said that when in 2013 the government decided to recapitalise the bank, its solvency ratio stood at 12 per cent.

The bank’s problems, Iosif, who served as chairman for a year until November 2013, said were caused by the economic downturn caused by the bail-in that led to companies going out of business and an increase in unemployment which in turn affected loan repayment.

According to the Co-op’s 2013 account’s, the bank generated an after tax loss of €1.7bn in 2013 compared to a loss of €23.8m the year before. The bank’s non-performing loans rose to €6.1bn from €2.7bn or to 46 per cent of the total from 17 per cent.

Iosif said that what went wrong with the Co-op that ultimately compelled the lender to sell its operations to Hellenic Bank was related to non-performing loans which became the main problem after the troika of the International Monetary Fund (IMF), European Commission and European Central Bank (ECB) came to Cyprus.

According to Iosif’s, largely incoherent account, authorities took no action to help the Co-op get rid of non-performing loans and so allow in fresh capital with willing investors.

“What did the Central Bank (of Cyprus) and the Finance Ministry do to tackle this approaching risk that was bigger by the day?” he asked.

He said that there has been an attempt to play down the Co-op’s overall contribution, which prompted the troika to propose its recapitalisation, and create the impression that a large feast had been taking place, by reproducing reports about irregularities observed in minor cooperatives such as those of Ayia Phyla and Ayia Napa.

The size of these scandals amounts to up to €65m compared to an overall €5.3bn in provisions for loan impairments resulting from the elimination of the value of collateralised assets of non-performing loans, Iosif said.

Charitou, who served in the board as independent member from March 2009 to October 2010, said there were members on the boards of directors of cooperatives who enjoyed political backing, allowing them to remain at their positions without being punished for wrongdoings.

“They had backing from high above,” he was quoted as saying. “Backing from parties, politicians with others who may have been their accomplices and took the decisions. There were possibly problems involving criminal cases that would have been brought to justice (and) they were dragging their feet all the time”.

Some cooperatives had very serious problems and some people, he did not name, “were trying to get as much as possible out of the corporation,” he said adding that there was reluctance to punish anyone or take action even in cases of officials implicated in possible criminal offences.

Certain cooperatives were under the control of political factions and their affiliation was known, said Charitou.

While in certain cases, managers at cooperatives acted in a conflict of interest, there were still some who did a good job, he said.

Thousands of teachers marched on the Presidential Palace in Nicosia on Tuesday night to protest over streamlining measures in state schools passed by the cabinet last month.

Approximately 4,000 to 5,000 teachers had gathered before the protest started at 6pm, while numbers surged to 12,000 later on, according to teaching union Poed’s secretary general Charis Charalambous.

Teachers gathered at the protest carried signs reading, Hands off Education! Dialogue = Democracy, while some wore shirts saying No to the dissolution of public schools.

Another sign at the protest depicted President Nicos Anastasiades, Education Minister Costas Hambiaouris and Archbishop Chrysostomos driving a bulldozer with the slogan ‘You haven’t left any education or culture’.

During the march, protesters also called on Hambiaouris to quit.

One teacher told Sigma TV he was marching for respect towards educators, and because “the government’s and the minister’s proposals are an offence to our dignity and ethos.”

Teachers were protesting measures concerning the abolition and reduction of exemptions from teaching hours for extracurricular activities and based on years of service and/or age. These measures aim to save funds spent on employment of additional teachers, spending them instead on programmes and projects in state education.

Spokesman for teaching union Oelmek Yiannos Socratous said: “This will be the springboard for other social struggles. Today, a brilliant page is being written for education in Cyprus. Some have sought to demean us. The struggle will not end here.”

During the main speech at the event Poed’s head Filios Fylaktou said: “Education, after many years, has reached a dangerous limit. Education has been turned into a time-bomb, which was activated by the Education Minister Costas Hambiaouris on July 2, 2018.”

Fylaktou said that there was a “complete lack” of understanding during discussions with the government, and that there is a need to respect the processes followed during negotiations and dialogue.

He added that the door is always open for a democratic dialogue.

Following his speech and comments about Hambiaouris, the crowd booed and called on the minister to quit.

CyBC reported that Fylaktou, who attended the event with his son, was especially touched by the amount of people who attended the protest.

After the protest, a concert was held outside the presidential palace.

In statements to Politis newspaper, Fylaktou said: “Today, the proud educators have won. We thank the thousands of teachers that sent a clear message for a dialogue, which is an unnegotiable value, necessary for us to take part in, so that schools can be bettered. At the same time, the dignity of the teachers and their work-ethic is also unnegotiable and needs to be respected.”

Earlier on Tuesday, an extraordinary house labour committee meeting was held where efforts to relieve the tension in education failed, as the government refused to withdraw the measures it announced last month aimed at the streamlining of state schools.

Following the meeting, government spokesman Prodromos Prodromou said that according to the decisions made by the cabinet in July, the finance minister agreed to increase the new teaching appointments by 159 teachers. “If the decision is cancelled or suspended, then we will not have those 159 in September,” Prodromou added.

The Limassol municipality on Tuesday said its decision to ban dogs from the Molos area of the city was taken to protect the public from do users who do not follow the law.

The decision to ban dogs from the area had been strongly criticised on Monday by the Animal Party.

Far from being a matter of a hatred of animals, the municipality said, the measure has been proposed by many people who are dog owners who agree that a society that cannot take care of the health of all needs such a legislation to ensure the safety of children.

“Despite the efforts of the municipality with various measures (placement of special baskets for the disposal of animal waste, day-to-day supervision by municipal officials, the distribution of material to enhance awareness) and the fact that fines provided by the legislation have not deterred offenders, unfortunately a number of dog owners continue to disrespect the rest of their fellow citizens using the park,” the municipality said.

However, the Animal Party cited article 18 of the offences and penalties laws, arguing that the outright ban of dogs from a public area is anti-democratic, as dog owners who do not abide by the law could simply receive a fine for neglecting to pick up their dog’s litter.

The Animal Party said that most dog owners are respectful of the area, making sure they pick up any of their dog’s litter. It also questioned whether the municipality would extend the ban to blind people – who need their dogs to help guide them.

The municipality argued it has a duty to ensure the health and safety of public places and the decision was made as the area is used daily by hundreds of families and children.

According to the authorities, concerns were raised by visitors about the amount of animal waste and the danger to children from dogs allowed to move around freely instead of being on a leash.

The municipality stressed the authorities are ready for a dialogue with residents and organised groups and already support a number of helpful practices, such as supporting a sterilisation programme for stray animals, recording all animals within the boundaries of the city, investigating cases of poisoning and animal abuse and informing people about animal protection and welfare.

At least 100 people showed up at an impromptu demonstration on Sunday to express their disapproval over the mayor’s decision and the Animal Party announced that they will also organise demonstrations to protest the decision.

The continuation of the second phase of Larnaca’s road restoration, damaged by previous works on the sewage system, is expected to begin in late September.

Larnaca Mayor Andreas Vyras said dozens of roads will be under repair as of September 17.

The government has allocated €2 million for streets in the downtown area, harbour areas, and around government buildings

“This is only a fraction of the total cost we feel is needed to get roads and network back to the expected standard of a modern European city,” the mayor said, according to the Cyprus News Agency.

Main roads such as the Chrysopolitissis – Mitropoleos road will also be fixed since they pose a safety risk to the public, he added.

“The total amount needed for the full restoration of the Larnaca motorway is about €13 million, which can only be made available to the municipality with state support,” he said.

A finance ministry official who served on the Co-op’s board of directors said on Wednesday the lender went down mainly because of problems it had accumulated in the past and that the acquisition of its operations by Hellenic Bank had helped the economy.

The co-operative banking sector had a deficient supervisory mechanism before 2013 when it came under the supervision of the Central Bank of Cyprus, said George Panteli, senior official at the finance ministry. The following year it was also monitored by the European Central Bank’s (ECB) Single Supervisory Mechanism (SSM),

The supervisor constantly changed assumptions citing the Cyprus’ ineffective legislative framework in managing non-performing loans, said Panteli who was testifying on Wednesday at the committee probing the collapse of the Cyprus Co-operative Bank, appointed by Attorney-General Costas Clerides.

The lender, recapitalised in 2014 with €1.5bn in taxpayers’ money before receiving additional €175m the following year, was initially considered viable before events that occurred later changed the situation, he continued. When in November 2014, the bank was placed under the SSM’s supervision, the formulas applied every year to attest whether a bank was in need of new capital changed.

Also, the Co-op suffered from a lack of proper guidance, said Panteli, who was appointed to the bank’s board in March, tendering his resignation three months later.

In addition, the decentralised administration and the large number of independent co-operative credit institutions, the absence of credit standards, combined with the Co-op’s social role in extending credit to communities and clubs without evaluating their ability to repay, all took its toll on the bank, he said.

The co-operative banks, supervised until five years ago by the Authority for Supervision and Development of Cooperative Societies (ASDCS), lacked both internal auditing mechanisms as well as computerised systems or a non-performing loans management framework, he said.

The Frankfurt-based supervisor, Panteli continued, wanted the banking system to recover and was pressuring credit institutions to move towards the direction of a stable, adequately capitalised banking system without non-performing loans.

Various countries in Europe were also pressuring for a consolidation in the Euro area’s banking system to allow the completion of the banking union, he said without naming the countries in question.

The supervisor “aimed at further mergers in the Cypriot banking sector to create larger and stronger banks able to cope with challenges, hence we saw those decisions,” he said.

The agreement between Hellenic Bank and the Co-op, the product of its failure to reduce its non-performing loans fast enough which wiped out its capital, was beneficial for the economy, public finances and the co-operative credit system, he said. The deal, which provided for the sale of the Co-op’s healthy operations to Hellenic, helped stabilise the economy, reflected in three credit rating upgrades that followed.

The board of directors of the Cyprus Co-operative Bank approved the deal with Hellenic before forwarding it to the main shareholder for approval, he said, adding that the cabinet accepted the deal on June 15.

Panteli said that the plan to give 25 per cent of the Co-op’s stock to its customers for free, tabled by Finance Minister Harris Georgiades in late 2016, was prepared together with the European Commission’s Directorate General (DG) for Competition, which was monitoring the implementation of the bank’s initial restructuring plan according to the terms of its recapitalisation, before the supervisor raised objections and consequently put it on hold.

In response to a question over why the initial plan to reduce the government’s stake in the bank to 25 per cent via a listing on the stock exchange was not implemented, he said that that procedure had begun with the plan to donate a quarter of the bank’s stock.

The ECB and the SSM raised objections against the plan months later and in late 2017 proposed alternative solutions, he said. The supervisor suggested instead attracting investors via an initial public offering (IPO) before then proposing doing so via a private placement, Panteli said.

In the meantime, he continued, trust in the Co-op was beginning to wane towards the end of last year and reports about the onsite inspection scheduled for the beginning of this year, shook customer confidence which in turn sparked outflows in the range of €3bn.

The above reasons compelled the bank to speed up the procedure of finding investors assigned to Citi as time was running out and European institutions were pressing for a quick completion, Panteli said.

The finance ministry official dismissed the notion that time was wasted in trying to put forward the plan to donate stock on the grounds that DG Competition agreed with it.

Loans in arrears beyond 90 days stood at 40 per cent already before the 2013 crisis broke out, Panteli said and added that the bank was facing such big challenges that it would have taken time to tackle, a luxury the Co-op did not have.
 

Following a huge protest march the previous day, the government on Wednesday invited teachers and parents to intensive talks on series of education issues with a set timeframe, as proposals were submitted by parties in a bid to break the protracted impasse.

“The government’s intention is to secure the smooth start to the new school year, which as a matter of fact, is decisive for the implementation of a series of reforms that have already been decided,” the presidency said in a statement.

The statement followed a march on Tuesday in which thousands of teachers and others took part to protest against reforms to streamline state education – which mostly focussed on limiting teaching hour exemptions – that teachers say were decided unilaterally by the cabinet on July 4. The government said it respected the right of people to protest.

The spat between teachers and the government has been ongoing throughout the summer holidays and is threatening the smooth commencement of the new school year next week.

In its statement on Wednesday, the government said education policy was the responsibility of the state and was not limited to the working conditions of teachers but also the thousands of pupils, parents, and broader society.

“Nevertheless, we recognise that when drafting education or any other policy there must be a creative dialogue with interested parties and experts over the policy under discussion,” the statement said.

It went on to stress however, that dialogue cannot be conducted under the threat of measures “that can only hurt education, pupils, and society”.

The government reiterated its call to teacher unions and parent associations to take part in intensive talks with a set agenda and timeframe.

The statement listed 16 issues for discussion, including the system of teaching exemptions, a teacher and pupil evaluation system, secondments, health and safety, infrastructure, education of people with disabilities, sports facilities and further training of teachers.

Teachers did not immediately respond to the invitation though they have demanded withdrawal of the July 4 government decisions that triggered the spat.

In parliament meanwhile, MPs decided to postpone a joint meeting of the House education and labour committees until Friday to give time to the minister to convey party proposals to President Nicos Anastasiades.

Disy chief Averof Neophytou proposed resubmitting a government proposal tabled on August 23, which had been promptly rejected by teachers. Neophytou said it can be in effect until the end of the year while talks take place to resolve all issues.

The matter was discussed during a meeting at the presidential palace on Wednesday evening and reports said afterwards that it had been accepted by the government.

Along with Neophytou, opposition parties proposed suspension of the July 4 decisions and any strike or other measures decided by the unions.

That suggestion was rejected by the government since the decisions were already put into force after the rejection of the August 23 proposal and suspending them would create problems at the start of the year including staff shortages.

The August 23 proposals were filed after a three-hour meeting between Anastasiades and the unions and were seen as a compromise to the previous ones.

The proposals included reduction in the teaching exemption hours for a form teacher from two to one. At the same time, absence record-keeping would be undertaken by the school administrations.

The government also proposed a reduction in the teaching periods, which educators got depending on years of service from two to one. Under the current system for example, primary school teachers have their periods cut by two to 27 after 15 years, and to 25 after 21 years.

The lost period would be compensated by an incremental pay rise.

An early retirement scheme was also proposed for teachers in secondary education who are 60 and above and primary school educators who are 58 and above. Their incentive would be to keep a 12 per cent penalty for early retirees that is in place at the moment.

Andreas Charalambous, the second senior finance ministry official and board member to testify at the Co-op committee, on Wednesday said that the state-owned bank may have performed better if it had secured expertise from abroad.

If the Cyprus Co-operative Bank had utilised the experience of bankers from abroad, as was the case in other banks, or at least of Cypriots who had worked outside the island, the bank’s future could have been stronger, Charalambous told the committee appointed by Attorney-General Costas Clerides, tasked with probing the failure of the Co-op, according to the Cyprus News Agency (CNA).

The official was obviously referring to Bank of Cyprus, which in 2013 hired former Bank of Scotland executive John Hourican together with other bankers experienced in the management of delinquent loans. Likewise, Hellenic Bank had hired Bert Pijls in late 2014.

The progress in the area of corporate governance and managing non-performing loans achieved in the past five years by the Co-op, which the government recapitalised with €1.7bn in 2014 and 2015, was insufficient compared to the overall challenges to avert its breakdown, said Charalambous. He was appointed member of the board of directors of the Cyprus Co-operative Bank in March, three months before he tendered his resignation.

In the short period he served in the board, he saw other members trying their best, he said.

The official said that the sale of the healthy part of the Co-op to Hellenic Bank earlier this summer was the best available option, hence the board’s recommendation was to approve Hellenic’s offer.

He said that there was pressure to sell the Co-op’s operations from both the European Central Bank’s (ECB) Single Supervisory Mechanism (SSM) and the European Commission’s Directorate General Competition, following the government’s decision to issue of a €2.4bn bond in favour and to subsequently deposit €2.5bn at the bank in March.

The whole procedure led to a single offer and under the circumstance it was the only solution, he added.

The initial plan to list the Co-op share on the Cyprus Stock Exchange (CSE) and allow with capital increases to dilute the government’s stake to 25 per cent, that would have allowed a wide dispersion of the bank’s stock to a large number of persons, was met with resistance from the supervisors, as the CSE offers limited options in tapping capital, he said.

On the other hand, a strategic investor would have brought additional advantages, including better corporate structures and governance, areas in which supervisors spotted weaknesses, Charalambous said.

The official, who heads the finance ministry’s directorate of financial stability, said that increasingly stricter rules governing capital adequacy in the banking system led to the Co-op having to comply with a capital adequacy ratio of 14.25 per cent compared to an otherwise minimum 9 per cent. The trend is expected to continue, and capital requirements will be twice as much they are today in the banking sector.

Portfolio criteria became stricter and are expected to become even stricter in the further, he said, adding that mergers could allow the creation of larger banks that would be healthier, he said.

Countries in Northern and Central Europe form policies which unlike South European countries, which ask for more time to adjust given their private sector’s higher level of indebtedness, are financially in a better shape, Charalambous said. If the voice of the south was heard, procedures could be more gradual, he added.

He said that the recovery of the Co-op’s portfolio, comprised of loans to households and small and medium size enterprises (SMEs) portfolio, has a certain degree of difficulty.

While reducing non-performing loans was not easy as it would have affected growth, it could have happened gradually at faster rates to convince the supervisors, he said.

“You need to try to adjust to the framework that is being shaped.”

The official said that measures taken by the ministry had not proved sufficient to avert its collapse.

He added that while meetings of the financial stability committee which falls under the Central Bank of Cyprus and its governor, and a supporting technical committee, allowed opinions about systemic risks to be expressed, the macroprudential risk analysis and policies to address them were part of the system.

Talks take place at a technical level in the absence of a deep analysis, Charalambous said.

“We still have a way to go until we reach the desired outcome,” he said.

Currently, there is a competition in progress for the purchase of consultancy services by the residual Co-op which will manage its €7bn in non-performing loans stock and other assets that will not be transferred to Hellenic, he said.

After the completion of the deal with Hellenic Bank, the residual Co-op will have no banking licence but instead only a licence to buy loans and related consultancy services which will allow the best possible management of the remaining assets to the benefit of the taxpayer without political interference, he said.

The chairman of the committee probing the demise of the Co-op said on Wednesday that it may fail to complete its work within the deadline after it emerged that key witnesses have been ordered not to reveal sensitive information.

Giorgos Aresti was speaking after the first witness from the central bank to appear before the committee gave his testimony.

Despite the witness’ omissions, Giorgos Ioannou’s statements made clear that while the Co-op’s supervisors – the Central Bank of Cyprus and the European Central Bank (ECB) – were concerned about events at the bank, the lack of scripted guidelines prevented them from intervening, according to the Cyprus News Agency.

Ioannou, a senior official at the central bank’s supervision division, who serves as sub-coordinator of the joint supervisory team with the ECB’s Single Supervisory Mechanism (SSM),  said that he could recall a meeting with former Co-op chief executive officer Marios Clerides after his resignation.

In that meeting, in the presence of the head of the central bank’s department of supervision Yiangos Demetriou, Clerides had explained that his decision to step down was prompted by corporate governance issues including interference in executive matters by the board of directors and its then chairman Nicholas Hadjiyiannis, Ioannou said.

The Cyprus Co-operative Bank, recapitalised with €1.7bn in taxpayers’ money, was compelled to sell its operations to Hellenic Bank in June after its failure to reduce its non-performing loans stock fast enough, wiped out is equity. The state-owned lender was jointly supervised by the Central Bank of Cyprus and the ECB’s SSM.

No minutes of the meeting were held, Ioannou said, adding that Clerides’ resignation caused concern as he is considered a notable banker.

While Demetriou may have informed governor Chrystalla Georghadji, as sub-coordinator of the joint supervisory team, he relayed the information to the ECB which invited Clerides to Frankfurt, Ioannou added.

The matter caused concern among the joint supervisory team and was taken into account in the bank’s annual evaluation, together with other serious matters related to corporate governance, Ioannou continued.

The joint supervisory team also met with former chairman Christakis Taoushianis and board members Giorgos Strovolides and Susanna Poyiadji, he said. He and Demetriou also met Poyiadji without SSM officials being present.

There was also a meeting with Adonis Pegasiou after the latter’s board appointment, he said without revealing additional details.

While the successive resignations of Co-op officials were causing concern among supervisors, prompting governor Georghadji to address letters to the finance ministry raising corporate governance issues, the supervisory authorities lacked any structured procedure to investigate resignations, he said.

Ioannou said that he was not aware whether the governor showed any interest in meeting former Co-op officials after they stepped down even though the head of the supervision department Demetriou, was kept in the loop.

Lastly, the central bank official said that there were issues with the timely relaying of information from the Central Co-operative Bank, the predecessor of the Cyprus Co-operative Bank, to the Central Bank of Cyprus, as well as with the quality of information.

Every co-operative credit institution acted more or less on its own which made the enforcement of central bank circulars more difficult, he said. The radical changes which had to happen quickly, did not take place in the desired degree and as fast as required.

Ahead of his testimony, Ioannou had presented the committee, appointed by Attorney-General Costas Clerides in early July, a letter from the ECB and the SSM, responding to an inquiry by the Central Bank of Cyprus.

But Wednesday’s testimony from Ioannou could not include information deemed confidential or sensitive concerning the ECB and the SSM but which could prove vital for the inquiry.

This prompted chairman Aresti to appeal at Central Bank of Cyprus to resolve the situation, according to CNA.

Resolving the issue is urgent as the committee which has to produce its final report within three months of its appointment, is running out of time, Aresti said. He added that a letter sent to Central Bank of Cyprus governor Georghadji remained so far unanswered.

The head of the Greens party, Giorgos Perdikis, has criticised the United Nations Development Programme (UNDP) for using the Turkish name – Mormenekşe – for the village of Limnia in the north.

He was referring to a recent UNDP document describing the work of the bicommunal technical committee on cultural heritage on reconstructing an old windmill in the village which used the Turkish name for the village.

Perdikis had urged the foreign ministry to formally notify parliament whether it is normal practice for the UNDP to Greek Cypriot place names in the north with Turkish ones.

In a letter of response earlier this month, ministry official Minas Hadjimichael told MPs that the ministry is closely monitoring what names are used to describe places in the north.

Hadjimichael stated in the letter that the Cypriot committee for the standardisation of geographical names had notified the UNDP over the issue, asking for a correction to the name of the village.

The community leader of Myrtou village, Andreas Athanasiou, made a similar complaint in the past after a presentation by the head of cultural heritage committee Takis Hadjidimitriou. Talking about the restoration works on the monastery of Ayios Panteleimonas, Hadjidimitriou referred to Myrtou by its Turkish Cypriot name Camlibel.

“We find it outrageous and unforgivable that the name of the pseudo-state was given in the presentation, while the Greek name was missing,” said Athanasiou.

Giorgos Perdikis made a similar complaint in 2015, when he reported a UNDP booklet which was distributed as a means to introduce the work of the bicommunal committee to the wider public. The booklet had printed the Turkish names right next to the original Greek names.

In his letter of protest at the time, he said his objection in no way affected his appreciation for the cultural heritage committee and their work.

“The work they do, restoring cultural monuments, is praiseworthy and very important. We have nothing but appreciation for the committee’s work,” Perdikis said.

The UNDP was not immediately available for comment.

A total of 16 migrants were found Thursday morning, 10 wandering near Peristerona, Nicosia and six in the Paphos district.

At around 6am ten persons walking on a road in the Nicosia district were spotted and taken to Peristerona police station where social welfare and civil defence officials were called in to attend to them.

A little later, around 7.30am, six migrants were picked up by police in Neo Chorio, Paphos.

The six, five men and a 17-year-old woman have been taken to the reception centre in Kokkinotrimithia by police and civil defence officers.  The migrants are crossing from the north of the island.

According to police, the six illegal immigrants reported to authorities that they left from the coast of Turkey on Wednesday in a boat with another two people and in the morning reached the beach near the chapel of Ayios Minas in Neo Chorio where they were found.

They reportedly said the other two persons, believed to be the traffickers, fled towards the sea and are likely to have returned to Turkey.

The group was initially taken to Polis Chrysochous police station and social welfare services and the civil defence department were informed.

The 16 migrants were found a day after 23 migrants were discovered walking along the street in Akaki and a week after another 14 men and one child were found in the same village in the Nicosia area.

They were also taken to Peristerona police station.

The migrants are the latest in a long list smuggled into the country.

There are 15,000 documented asylum seekers – mostly Syrian – already on the island, and Cyprus is now a well-established “ideal” human smuggling destination via Turkey.

Cyprus has already taken in a lot of refugees according to its population. Last year, Greece and Cyprus had the highest number of asylum seekers per million population in the EU with 5,295 and 5,235.

Cyprus topped the list in the first three months of 2018 with 1,551 applicants per million population.

It emerged earlier this month that Cyprus had been included in a list of EU member states where so-called controlled centres could be located to process migrants and refugees disembarking on EU soil.

It is part of the ongoing attempts to forge a common migration policy within the bloc.

But Nicosia opposes the move, arguing that Cyprus has already taken in enough refugees according to its population.

There are also fears that these centres, while supposedly geared to distinguish between economic migrants and genuine refugees quickly and efficiently, will become little more than sprawling, long-term detention camps.

The processing facilities formed part a ‘concept paper’ circulated by the Austrian EU presidency based on the conclusions of the June 28 European Council on migration.

The document was only circulated among some EU members. Even though Cyprus would be directly affected, the government was never officially given a copy

BRITAIN is drawing plans to expand a port at RAF Akrotiri to service its military bases on the island in case of Brexit without a trade deal with the EU, reports said on Thursday.

The reports were neither confirmed nor denied by UK authorities.

According to The Times, plans for the facility at RAF Akrotiri are already being drawn up as part of preparations to limit the impact of Britain leaving the EU without a deal.

Currently, equipment and other goods headed for the British sovereign bases (SBA) on the island go through Cypriot ports. But British officials are concerned that inspections imposed by the EU without a Brexit deal “would seriously threaten operations,” The Times said.

The British bases in Cyprus, when asked to comment on Thursday, cited a UK government statement saying: “We remain absolutely confident that we are going to secure a good deal as that is in the interests of both the UK and the EU and we working with the government of Gibraltar and our European partners to ensure this.

“At the same time, it is right that we make sensible precautions for no deal, to avoid any potential disruption in Gibraltar or of the sovereign base areas in Cyprus.”

A small port already exists at Akrotiri but it would need considerable expansion to be able to service the SBAs’ needs.

The spokesperson at the bases declined to comment on the extent to which the bases currently use the island’s ports, saying they did not have that information to hand.

According to forces.net on Thursday, the base does have a landing jetty but it is not big enough to take all of the supplies needed – that small port would be where the expansion would happen.

The Times said the MoD is thought to have put a provisional claim on the £1.5bn contingency funds for no-deal preparations for the project. Other UK media reports said the project would cost less than £100 million.

It quoted unnamed Whitehall source who said the plans were “essentially to extend the RAF port in Akrotiri because it’s too small to be used properly”. They said that the plan was to “basically build a new one”. “If we had a no deal the port — a Cypriot one — would become extremely problematic whereas the RAF port is considered British territory,” the source said.

Gerald Butt, a former BBC Middle East Correspondent told British Forces Radio (BFBS) on Thursday that should there be no Brexit deal, things would get complicated with supplies having to cross borders. It would be “inconvenient, time-consuming and disruptive to military operations”, he said, especially if Akrotiri was vitally needed in the Middle East or elsewhere. “The most obvious thing to do is to build a naval port,” Butt said. “It would be starting from scratch”.

“If there was no deal, it would make a lot of sense,” he added. However, he foresaw several issues that might need addressing. “What would the reaction of the Cypriots be?”

He conceded Cyprus doesn’t have to be consulted by the UK but mentioned an “underlying current” or among some Greek Cypriots about the continued British presence on the island due to issues related to colonial rule.

In 1960 when Cyprus gained independence, Britain retained 157 square kilometres of sovereign territory at Akrotiri/Episkopi and Dhekelia which are being used as military bases. It also has radar installations on the Troodos mountain and a listening post at Ayios Nicolaos, in Famagusta. RAF Akrotiri has been involved in operations in the Middle East for years 24 including during the 2003 Gulf War, which according to forces.net, saw more than 15,000 aircraft movements that year.

It said the bases was also used an air bridge into Afghanistan and was a staging base for support aircraft for operations over Libya in 2011.

In September 2014, Akrotiri joined the fight against ISIS in Iraq, carrying out daily sorties, and more recently, in April this year, took part in an raid in Syria orchestrated by the US, the UK and France. Four Royal Air Force Tornado jets fired Storm Shadow missiles during at a military facility near Homs where it was assessed that Syria had stockpiled chemicals. Britain’s Prime Minister Theresa May only informed President Nicos Anastasiades just after midday the same day hours after the air strikes on the Syrian targets.

By Stelios Orphanides

Former Co-op board member Kypros Ellinas told investigators on Thursday that bank’s plan for a listing of its share that would have otherwise allowed it to tap private capital was unfairly blocked by supervisors, the Cyprus News Agency (CNA) reported.

Ellinas, the first witness to testify on Thursday at the committee appointed by Attorney-General Costas Clerides tasked with probing the reasons that led to the demise of the state-owned bank recapitalised by the taxpayers with €1.7bn, said that the bank had already prepared itself for a listing on the Cyprus Stock Exchange (CSE) in 2016, which would have allowed it to seek fresh private equity whenever deemed necessary.

“We started early (and) had two years (ahead) to tap capital,” said Ellinas who served as board member from July 2016 until June 2018, when he stepped down.

The disappointing outcome of the Co-op’s attempt to get its stock listed was one of the events that gave the bank the impression that it was treated unfairly, and prompted his resignation, he said.

After supervisors told the Co-op in September that it wouldn’t require additional capital, the onsite inspection that took place early this year produced an unprecedented result both at home and abroad, as it concluded that provisions for loan impairments had to be increased by €800m, the former board member said. This led to supervisory pressure to find a strategic investor for the bank with procedures which were not very transparent.

While supervisors, i.e. the Central Bank of Cyprus and the European Central Bank’s (ECB) Single Supervisory Mechanism, did insist on shorter procedure that would have taken 30 days, this deadline was extended to 40 days which proved insufficient to attract investors, he said.

The SSM was pressuring towards the sale of the Co-op’s operations, especially in 2018, Ellinas said.

He added that the sale of the bank could have not been completed before a merger with the 18 independent cooperatives it administered had been completed which ultimately happened in early 2017.

In March, two months after the disappointing results of the SSM’s onsite inspection, he travelled to Frankfurt together with chief executive officer Nicholas Hadjiyiannis and chairman Giorgos Hadjinicholas, to convince the supervisor of the merits of the bank’s privatisation plan via capital increase.

The message they got there was that the supervisor was favouring a break-up of the bank into a bad bank and a good bank that could be acquired by another Cypriot lender, as this would benefit the Co-op, the banking system and the economy, he said.

He added that the supervisors already objected to the listing already in 2017, Ellinas said.

While the Co-op was making progress in reducing its non-performing loans, its supervisors did not give more time to reduce them, he said. A target ratio of 20 per cent for its delinquent loan portfolio was impossible to achieve given that the lender’s portfolio comprised mainly of mortgages. Still, the lender managed to reduce them by €800m at the end of last year compared to August.

The sale of loans, he continued, was not possible with the legislation in place at the time. Ellinas questioned the timing of the amendment in the law on the sale of loans early July, part of a reform package aiming at facilitating the management of non-performing loans requested by the European Commission in exchange to the approval of the sale of the Co-ops assets to Hellenic Bank.

The majority in the bank’s board was in favour of assigning a prominent external loan manager to allow the sale of immovable property.

Ellinas said that rumours about a possible bail-in in the Co-op led to an increase in supervisory pressure to the bank amid an increase in deposits outflow, while the issue of the €2.4bn government bond in early April in favour of the bank and the subsequent deposit of €2.5bn was considered state aid.

While supervisors were mainly concerned about governance and to a lesser degree, about weaknesses they spotted at the bank’s officials, they failed to have those they considered incompetent replaced he said.

The lender, he said, did have a skills gap, as it lacked the proper human resource management systems.

Ellinas said that the bank’s plan to offset the reduction in net income from the management of non-performing loans, via its insurance business, a reduction of its deposit rates and a voluntary exit scheme plus a reduction of its branch network, could have worked.

He also said that other banks were eying the Co-op for years amid rumours about a possible bail-in which intensified ahead of the presidential elections. Indicatively, Bank of Cyprus, the island’s largest, expressed interest in acquiring the cooperative bank of government employees, while a consultancy company advised Hellenic Bank to buy the Co-op early on.

With respect to Altamira, the Spanish non-performing loans management specialist, Ellinas said that Citi, the US bank hired to assist the Co-op find investors, opined that it the agreement was fair for the bank and that related expenditure would have a neutral impact on the bank.

By Stelios Orphanides

A Co-op executive told the committee investigating the failure of the Cyprus Cooperative Bank that the lender could have made it if conditions had been less adverse, the Cyprus News Agency (CNA) reported on Thursday.

The Co-op had to struggle with its legacy, the nature of its portfolio and the fact it was government-owned, all combined with the institutional framework which prevented it from producing better results, said Yiannos Stravrinides, head of communications and strategy, told the committee appointed by Attorney-general Costas Clerides, according to the CNA. He also admitted being a friend of the finance minister.

A decrease of the bank’s non-performing loans of around €7bn which could have allowed the bank to stay in business, was the bank’s top priority and had therefore hired “all sorts of advisors,” he said.

“All the Co-op’s ammunition was spent there but it had the worst among bad portfolios, with an average retail loan of €115,000,” he was quoted as saying. “The bank’s division managing arrears had 120,000 accounts to restructure, had all people’s homes as collateral and had some laws that weren’t helpful. Time ran out and things started getting tough in the summer of 2017”.

The strategic aim was organic restructuring as the bank could neither auction nor recover via foreclosures given its business model of ethical banking, Stavrinides said. While the bank could have resorted to foreclosures more often, there was no framework or will to do so as public opinion objected, he said citing reactions to the bank’s agreement with Spain’s Altamira a year ago, which provided the management of the Co-op’s delinquent loans portfolio by a joint venture, as well as reaction from political parties to the bank’s decision to reduce its branch network.

“It’s not easy, it was a very difficult environment and the public support made things worse,” Stavrinides said in reference to the bank’s recapitalisation with €1.7bn by the taxpayer. “That public support had to disappear”.

Stavrinides said that the foremost concern of the bank which saw an outflow of deposits triggered by rumours about its failure that set off late last year, was the protection of its depositors and added that the bank would have performed better if it had completed its merger sooner than early 2017.

“I feel particularly proud that depositors have were transferred to Hellenic Bank in the same capacity,” he said in reference to those of Bank of Cyprus who were bailed in in 2013 and became shareholders.

In the summer of 2017, everything, including the drop in non-performing loans, the completion of the agreement with Spain’s non-performing loans specialist Altamira and finding investors, had to happen quickly, he said and invoked the head of the head of the division of supervision of the Central Bank of Cyprus, Yiangos Demetriou.

Stavrinides dismissed the criticism by Auditor general Odysseas Michaelides on the Co-op executive’s comment right after investors had expressed interest to acquire the Co-op or part of its assets, as the invitation had attracted 16 companies, eight of which were deemed by Citigroup, the Co-op’s advisors as compatible.

As the Co-op had to go in resolution, it was broken down in to two parts, a healthy and a bad bank, with investors focusing their interest on the healthy part of the Co-op, ignoring the other, which ultimately led to Hellenic Bank remaining the main contender to acquire the Co-op’s operations, removing so a large portion of delinquent loans from the banking system, he said.

The Co-op’s advisor proposed a procedure that allowed all possible options, made necessary by the bank’s predicament, Stavrinides said.

“If this procedure failed, the bank would be in trouble,” he said adding that the European Central Bank’s (ECB) Single Supervisory Mechanism (SSM) “was already holding us by the throat. It wasn’t a normal procedure”.

The Co-op which was initially aiming at reducing the government’s shareholding from over 99 per cent to 25 per cent via successive share issues following a listing on the Cyprus Stock Exchange, after it got its first prospectus approved by the Cyprus Securities and Exchange Commission (CySEC) had to withdraw the second prospectus, he said. The decision to do so was taken when the legal basis of the government’s decision to allocate a quarter of the bank’s stock to its customers free of charge was challenged.

The donation of stock would have allowed the Co-op to comply with minimum share dispersion requirements of the Cyprus Stock Exchange’s main market, he said.

Stavrinides said that Finance Minister Harris Georgiades, already facing criticism for backing his childhood friend Nicholas Hadjiyiannis’s questionable corporate governance practices in the bank before and after he became its chief executive officer (CEO), was his best man who also became nine years ago, the godfather of his son.

When he expressed his intention to apply at the Co-op, Georgiades “was very reserved, arguing that the bank was in a transitional stage and I should ponder matters carefully,” Stavrinides continued.

Stavrinides said in response to a question that he became accountant with Hadjiyiannis, the bank’s chief executive whom his predecessor Marios Clerides accused in his testimony earlier this month of undermining him, and later found out that the minister and Hadjiyiannis graduated from the same school in different years.

The banker had to answer to criticism from the two members of the committee about the Co-op’s decision to venture into corporate banking and international banking instead of concentrating on reducing non-performing loans.

Stavrinides responded that the bank’s decision to engage in corporate banking was an idea of former CEO Clerides.

It could help reduce the bank’s non-performing loans ratio by extending new credit, said Stavrinides who is taking advantage of the bank’s early exit scheme. The European supervisor, he added was also pressuring the bank to extend new loans.

By George Psyllides

PRESIDENT Nicos Anastasiades is prepared to amend a July 4 decision that irked teachers and led to protests, provided it was warranted, amid an intensive dialogue based on a compromising proposal tabled on August 23 that has already been rejected by the teachers, the government spokesman announced on Thursday.

In a statement on Thursday afternoon, the government reiterated its determination to resolve all outstanding issues, based on the various expert studies and the recommendation of the European Commission and other organisations.

“At the same time, he wants to send a message, which he hopes those involved in the country’s education can relate with: the government’s determination to introduce the reforms necessary to attain the education system the new generation is entitled and the society expects,” Prodromos Prodromou said.

The two sides have been at loggerheads for the most part of the past two months over a July 4 cabinet decision, which mostly focused on limiting teaching hour exemptions. The decisions allowed the government to hire around 157 teachers instead of some 320 previously mooted.

Teacher unions said the decisions were taken unilaterally without consultation.

The government tabled a compromise proposal after a three-hour meeting with teachers on August 23, which was promptly rejected.

On Tuesday, thousands of teachers and people who supported them took part in a protest march, which ended up outside the presidential palace.

The next day, the government reiterated its call to teachers to return to the negotiating table as political parties launched initiatives to bridge the divide between the two sides.

On Thursday afternoon, Prodromou said the administration was prepared to make corrections if evidence was presented to warrant them during an intensive dialogue that would have the August 23 proposals as its starting point.

Anastasiades also suggested that labour disputes should be referred to the education service’s joint personnel committee while those concerning the state’s education policy should be negotiated with the minister who will be flanked by experts.

“The president hopes that today’s proposal affords the opportunity for a creative dialogue on all the issues that concern education with a three-month deadline,” Prodromou said.

The August 23 proposals were filed after a three-hour meeting between Anastasiades and the unions and were seen as a compromise to the previous ones.

The proposals included reduction in the teaching exemption hours for a form teacher from two to one. At the same time, absence record-keeping would be undertaken by the school administrations.

The government also proposed a reduction in the teaching periods, which educators got depending on years of service from two to one. Under the current system for example, primary school teachers have their periods cut by two to 27 after 15 years, and to 25 after 21 years.

The lost period would be compensated by an incremental pay rise.

An early retirement scheme was also proposed for teachers in secondary education who are 60 and above and primary school educators who are 58 and above. Their incentive would be to keep a 12 per cent penalty for early retirees that is in place at the moment.

The end of the workday Friday will see the end of the island’s co-operative sector after more than a century and the birth of the cooperative asset management company (Kedipes) which will be tasked with handling the billions in non-performing loans, which caused the Co-op bank’s failure.

The remainder of its assets and deposits will be transferred to Hellenic Bank and from Monday the co-op bank will cease to exist as an entity and disappear as a brand in the next 15 months.

Kedipes will take over €8.3bn worth of assets of which €6.97bn in NPLs, €0.5bn in ‘good’ loans, around €620m in immovable property, and cash and shares in other companies worth €230m.

The co-op will also pay €139m to 1,026 workers who opted for the voluntary retirement scheme.

Hellenic will be taking over some €9.7bn in deposits, €66m in other obligations, loans worth €4.6bn, including €420m non-performing, Cyprus government bonds totalling €4.08bn, €1.16bn in cash, and other assets worth €25m.

Hellenic has stressed that co-op cards – credit and debit — will continue to be active and customers can also use them at Hellenic Bank ATMs without a charge.

Account numbers will remain the same and co-op chequebooks remain valid. Loan agreements will be transferred with the same conditions unless customers wish to renegotiate according to the terms offered by Hellenic.

Time deposits will maintain their current terms until maturity and insurance contracts will also remain valid under the same terms.

Some 100 co-op branches will be shuttered in the next 15 months, 43 in the first phase. The co-op bank had 172 branches in total.

Out of the 43, 25 did not operate as full-time branches. The timeframe for the first closures is from mid-September to early October.

In October, Hellenic will put in operation two mobile banking units to serve around 40 communities in the countryside.