Cyprus’ government has approved a multi-billion euro deal which will see Hellenic Bank take over the country’s crisis-stricken Cooperative Bank, it has been reported.
The Cyprus Cooperative Bank – which is 77% state-owned following a financial crisis and bailout in 2013 – put itself up for sale in March.
Finance Minister Harris Georgiades said the deal would see Hellenic Bank, also based in Cyprus, manage €9.7bn (£8.5bn) worth of client deposits.
Hellenic will also absorb €10.3bn (£9bn) in assets, including loans, bonds and cash, operate 72 Cooperative Bank branches and employ 1,100 of its 2,600 workers.
Mr Georgiades said another €8.3bn (£7.3bn) of the Cooperative Bank’s assets will be taken over by the state, including €600m ($£527m) in bank-owned real estate and €7bn euros (£6.2bn) worth of bad loans.
Meanwhile, EU competition regulators have approved a plan by the Cypriot government to inject around €3.5bn (£3bn) in state aid to the Cooperative Bank.
The commission said the state-aid measures include a counter-guarantee to the guarantees provided by CCB to Hellenic Bank related to the sale, including an asset protection plan.
The move is part of strategy by the Cypriot government to speed the reduction of non-performing loans in Cypriot banks. There is also a programme to help co-operative borrowers affected by the crisis and the strengthening of Cyprus’ foreclosure and the sale-of-loans law.
In Cyprus, the news prompted criticism of the bank in the Cyprus Mail, which claimed its downfall was because of “problems accumulated over decades of mismanagement”.
It accused the bank of “giving out loans that would never be repaid, often at low interest rates and secured by grossly overvalued collateral”, with the backing of politicians who had made foreclosure law “toothless”.