Co-op rumour spreads panic
THE GOVERNMENT, Central Bank and Cooperative Movement rushed to calm fears of a new raid on bank deposits yesterday after rumours, texts and reports circulating spread panic among depositors who formed long queues mostly outside cooperative banks.
Massive lines of people formed outside cooperative banks across the country seeking ways to either get their money out or divide their fixed deposit accounts into smaller ones of under €100,000 following the circulation of text messages claiming the government was about to impose a haircut on cooperative bank deposits.
Other depositors whose fixed deposit accounts had yet to mature but who also heard the rumours turned up simply to withdraw the €300 maximum amount permitted from their accounts.
Head of the Cooperative Central Bank Erotocritos Chlorakiotis yesterday assured the public that deposits at the cooperative credit institutions were safe, insisting that the rumours of a haircut were completely “unfounded”.
He said the run on cooperative banks was a result of two developments: the untrue text messages going around the last few days and a misleading news article posted on a television channel website yesterday morning.
Chlorakiotis explained that rumours of a haircut culminated yesterday morning as a result of a misinterpretation of discussions between the government and unions about how to save provident funds deposited in the Bank of Cyprus (BOC) and Laiki.
One television channel had posted an article yesterday referring to discussions between the government and unions on preparing a bill regarding the provident funds deposited in BOC and Laiki.
The cooperative banker said the article failed to specify the difference between beneficiaries of the provident fund of up to €100,000 which are insured and beneficiaries of over €100,000 for which they are preparing a formula of a scaled haircut. In other words, the effort is to treat Laiki workers’ provident funds in the same way that deposits in BOC are being handled, that is, with up to 60 per cent wiped out and partly exchanged for shares in Bank of Cyprus.
However, the article in question omitted to refer specifically to the beneficiaries of the two banks’ provident funds, referring instead to depositors which caused confusion and distress among the public.
“Those who read it understood that this was about deposits in any bank, hence the peak in concern of the people,” said Chlorakiotis.
The banker put it down to a misunderstanding, but left a question mark over the motive behind the text messages doing the rounds, saying he did not want to believe this was an orchestrated effort to harm the cooperative movement.
He said the text messages were completely unnecessary and only served to spread panic. “Those spreading this know it’s not true.”
Speaking on state broadcaster CyBC, Chlorakiotis said it was made perfectly clear in the memorandum of understanding agreed with the troika, which has already been made public, that any recapitalisation needs of the Cooperative Movement and Hellenic Bank will be covered by their own capital and from the €10 billion bailout money.
Finance Minister Haris Georgiades yesterday confirmed that around €1.2 billion of the €10 billion has been earmarked for the cooperative banks and societies to cover any possible recapitalisation needs.
The Cooperative Societies’ Supervision and Development Authority yesterday called on members and customers of cooperative credit institutions to ignore text messages doing the rounds regarding the fate of deposits in coop banks.
The authority described the texts as “malicious”, and aimed at shaking people’s confidence in the cooperative movement.
“Our people are experiencing tragic moments,” said the supervisory authority, adding that it wants to believe the whispers and rumours emanate from people’s agony and are not part of an organised effort.
The Central Bank also released a statement denying media reports that a general haircut will be applied on deposits in other banks, noting that this would not happen “because such an action is not provided for in the political decisions taken by the Eurogroup on March 25, 2013”.
The Finance Ministry echoed the above institutions, saying the rumours of a possible haircut on coops were “groundless”.
“Such an issue was never discussed or tabled, as such it is categorically stated that no such issue nor intention exists,” said the ministry statement.
“The memorandum has been agreed with the troika, in which there is no additional measure included which would lead to the need to impose any new haircut on deposits on the cooperative movement of Cyprus,” it added.
The ministry argued that based on the implementation of the last Eurogroup decision for the winding down of Laiki and restructuring of Bank of Cyprus, the Cypriot banking system was “on track towards stabilisation and consolidation”.
The finance ministry urged the public “not to give weight to unfounded rumours that have the sole purpose of harming the banking system of Cyprus and shaking the public’s confidence in the banks and other credit institutions”.
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