NICOSIA, June 14 (Xinhua) -- A banking era came to an end with the ironing out of last details of a deal under which Hellenic Bank, Cyprus's third largest lender, will acquire the operations of the Cyprus Cooperative Bank(CCB), banking sources said on Thursday.
Cypriot President Nicos Anastasiades called to his office the leaders of the four biggest trade unions to brief them on the details of decisions aimed at safeguarding the interests of CCB's 2,500 employees.
His spokesman said that about 900 of them, mostly aging employees, will be offered "generous" terms for voluntary retirement, while the rest will either stay with the CCB or be absorbed by Hellenic Bank.
Trade unionists said after the meeting that the details for securing the rights of employees are part of the deal.
They said they were satisfied by what they heard, but further negotiations will be needed between trade unions and the bankers.
The deal expected to be officially signed and announced any hour, signals the end of a banking era that is going back to 1909, when small scale farmers and businessmen set up the first Cooperative Credit Society.
They pooled together their savings so as to get rid of loan mongers by giving loans to the farmers though their credit society.
The practice caught up and within about 50 years there were 350 cooperative credit societies operating at village level. The owners were their depositors and loan owners, who had to buy some shares before getting a loan.
A Cooperative Central Bank was set up in 1925 to manage the funds of 24 existing local societies.
The Cooperative Movement, as it became to be known, flourished between 1960 and 1980, when small village branches in 350 communities started operating on the lines of small banks and additionally operated village cooperative stores.
The Cooperative Movement became the second largest lender, representing about 42 percent of deposits.
However, local branches lacked expertise and central management, resulting in bad decisions. On top of that, corruption in the form of loans without enough security by officials of strong societies led a big crunch just before the economic crisis that led to the 2013 bail-out of Cyprus by the Eurogroup and the International Monetary Fund.
In 2012 the government became the owner of Cooperative Central Bank when it injected 1.8 billion euros in a move to save the deposits of tens of thousands of small depositors.
Under the directions of the troika, the team of technocrats who represented the European Commission, the European Central Bank and the International Monetary Fund in the bailout negotiations, cooperative credit societies were grouped into 18 large branches. The Cooperative Central Bank was renamed into Cyprus Cooperative Bank to avoid confusion with the Cyprus Central Bank.
A run on cooperative societies deposits six months ago caused by rumors of an imminent collapse prompted the government to make a "deposit" of 2.5 billion euros into the Cyprus Cooperative Bank in April, by actually depositing 250 million euros and issuing bonds for the equivalent of 2.25 billion euros which were given to the lender.
In exchange, the government became the owner of the Bank's non-performing loans, (the "bad bank") estimated at about 6.5 billion euros.
At the same time the government issued an invitation for the expression of interest in acquiring the good part of the Cyprus Cooperative Bank.
Hellenic Bank was the successful bidder and is now negotiating the final details of the deal.
No details of the agreement were announced, but according to press reports, Hellenic Bank will inject about 150 million euros in new capital into the Cyprus Cooperative Bank, down from an original estimate of between 450 million euros and 550 million euros.
The government also issued new bonds worth about 5 billion euros, which is the difference between the Bank's current deposits and the amount of loans being serviced.
Reports suggested that the only outstanding issue before the deal becomes official is an announcement by Hellenic Bank as to which of its own shareholders will take part in the increase of the Cyprus Cooperative Bank capital and become its new owners.
