NICOSIA, Aug. 31 (Xinhua) -- The Central Bank of Cyprus (CBC) has taken away the keys from Cyprus Cooperative Bank (CCB), the troubled state-owned lender, bringing to an end a banking history of 97 years, a statement by the lender said on Friday.
CCB said its license to operate as a commercial bank was withdrawn as of the end of working hours on Friday and notified its customers that their accounts would be transferred to Hellenic Bank, which purchased its good part.
It added that for a few more days customers would be serviced as usual until its new owner makes arrangements to close down about half of its 225 premises and take over the rest.
The closing down of CCB was a sentimental event for Cypriots, who lamented the end of a social phenomenon, the cooperative movement, which was started in 1920's as a reaction by farmers and small businessmen to their exploitation by loan sharks.
Small bank-like cooperative credit societies were set up locally to receive small deposits and give out loans at reasonable rates. The owners of the local cooperative societies were their customers.
The cooperative movement expanded and grew in size after a cooperative bank was set up to act as the central banker of local operations, entering into the real banking sector after Cyprus became independent from British colonial rule in 1960.
Most local credit societies adopted banking practices as of 1980, expanding both in terms of deposits and loans.
However, this expansion actually became the dynamite that blew up the movement about 30 years later. Loans were given out easily and were secured with properties which were usually overvalued.
A former board member testifying on Friday before a panel investigating the reasons for the demise of the cooperative movement recounted several instances of loans which could never be recovered.
He said that in one case a loan was given to a 90-year old woman, to be repaid within a 40-year period. In other cases loans were given which were secured by public cemeteries and even churches.
It was no surprise that when economic crisis hit Cyprus in 2013, CCB had the highest rate of non-performing loans, each one averaging 115,000 euros (133,488 U.S. dollars), but totaling 7.5 billion euros, or one quarter of the bad loans of all banks.
Just before the 2013 crisis, the government had to inject 1.5 billion euros to recapitalize CCB, becoming its owner. Four years later it had to disburse another 1.7 billion euros to avert its collapse.
CCB's outgoing chief executive officer (CEO) told the probe board that as of March this year EU's Single Supervisory Mechanism was putting pressure on the bank and the government to separate the bad part of the lender and merge its good part it with another local bank.
The government obtained the bad part of non-performing loans worth 7.5 billion euros, while the good part was folded into Hellenic Bank, which paid nothing for the acquisition.
It was only required to increase its capital by 150 million euros.
As of Monday, Hellenic Bank, until now the third largest lender, will become the leader in retail banking in Cyprus, growing to the size of the island's primary lender, Bank of Cyprus.
