In response to today's article in “Simerini” newspaper with the title "Another 3 billion for the cooperative sector", the Central Bank of Cyprus (CBC) announces the following:
(1) The capital needs of the cooperative sector have been calculated by the Troika and the CBC to be €1,5 billion, after taking into account the losses that would possibly arise from PIMCO’s adverse scenario. These calculations relate to all cooperative credit institutions and not just to the 17 in PIMCO’s sample. Thus, no additional needs will arise from the realisation of PIMCO’s adverse scenario. Simerini’s article is thus highly misleading.
(2) During the meeting of the House of Representatives’ Commerce Committee last Friday (9 August), Governor Demetriades mentioned that, in relation to non-performing loans, PIMCO’s adverse scenario has been exceeded in some cases. He did not claim that the losses of the cooperative sector for 2012 are worse than those referred to in PIMCO’s adverse scenario. In addition, there are cases where non-performing loans are much better than in PIMCO’s scenario.
(3) The strategy agreed with the Troika and the forthcoming restructuring plan, include all the necessary measures to correct the weaknesses and mistakes of the past that led to a high proportion of non-performing loans.
(4) On the website of the International Monetary Fund (IMF):
http://www.imf.org/external/pubs/ft/scr/2013/cr13125.pdf (page 16), the IMF states that the co-operative credit sector in Cyprus is viable and its recapitalisation will be completed with state support and without the participation of depositors.
In conclusion, the CBC notes, once again, that the cooperative sector is regarded as viable by our lenders, based on a detailed and thorough analysis of all the data, and for this reason it has been considered appropriate to provide €1,5 billion for its recapitalisation.