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COOPERATIVE CENTRAL BANK
LIMITED
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
COOPERATIVE CENTRAL BANK LTD
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
CONTENTS PAGE
Officers and professional advisors 1
Report of the Committee 2 - 3
Independent Auditors' report 4 - 6
Consolidated statement of profit or loss and other comprehensive income 7
Consolidated statement of financial position 8
Consolidated statement of changes in equity 9 - 10
Consolidated statement of cash flows 11 - 12
Notes to the consolidated financial statements 13 - 87
COOPERATIVE CENTRAL BANK LTD
1
OFFICERS AND PROFESSIONAL ADVISORS
Committee: Georgios Iosif - Non-Executive Chairman (until 25 October 2013)
Nicolas Hadjiyiannis - Independent Non-Executive Chairman (member from 25 October 2013,
chairman from 8 November 2013)
Charalambos Christodoulides - Independent Non-Executive Vice Chairman (from 25 October 2013)
Demetrios Stavrou - Non-Executive Member (until 25 October 2013)
Yiannakis Yiannaki - Non-Executive Member (until 25 October 2013)
Georgios Marinou - Non-Executive Member (until 25 October 2013)
Demetris Christou - Non-Executive Member (until 25 October 2013)
Pavlos Theodotou - Non-Executive Member (until 25 October 2013)
Dr. Nearchos Ioannou - Non-Executive Member (until 25 October 2013)
Mikis Neophytou - Non-Executive Member (until 25 October 2013)
Michalis Papageorgiou - Non-Executive Member (until 25 October 2013)
Demetris Theodotou - Non-Executive Member (until 25 October 2013)
George Hadjinicolas - Non-Executive Member (until 25 October 2013)
Dr. Andreas Charitou - Independent Non-Executive Member (until 25 October 2013)
Dr. Gregoris Maliotis - Independent Non-Executive Member (until 25 October 2013)
Athanasios Stavrou - Independent Non-Executive Member (until 25 October 2013)
Georgios Kittos - Independent Non-Executive Member (until 25 October 2013)
Panicos Pouros - Independent Non-Executive Member (until 25 October 2013)
George Strovolides - Independent Non-Executive Member (reappointed on 7 November 2013)
Lambros Pieri - Independent Non-Executive Member (reappointed on 7 November 2013)
Erotokritos Chlorakiotis - Executive Member (until 18 September 2013)
Stavros Iacovou - Executive Member (from 8 November 2013 until 15 January 2014)
Marios Klerides - Executive Member (from 22 January 2014)
Efthymios Pantazis - Executive Member (reappointed on 22 January 2014)
General Manager: Erotokritos Chlorakiotis - (until 18 September 2013)
Efthymios Pantazis - (Deputy General Manager from 19 September 2013 until 10 January 2014)
Marios Klerides - (from 11 January 2014)
Senior Management: Efthymios Pantazis - Senior Director of Banking services
Stavros Iacovou - Manager Administrative Services
Costas Araouzos - Manager Finance
Demetris Koulas - Manager Financial Services
Independent Auditors: KPMG Limited
Certified Public Accountants and Registered Auditors
14 Esperidon Street
1087 Nicosia
Cyprus
Legal Advisors: Tassos Papadopoulos & Associates
Christos M. Triantafillides in cooperation with Ioannis Klerides & Sons
Registered office: 8 Gregori Afxentiou street, 1096 Nicosia, P.O. 24537, 1389 Λευκωσία
COOPERATIVE CENTRAL BANK
REPORT OF THE COMMITTEE
2
The Committee of Cooperative Central Bank Limited (the ''Bank'') presents to the members its Annual Report
together with the audited consolidated financial statements of Cooperative Central Bank Limited that include the
eighteen Cooperative Credit Institutions (“CCIs”) and the twelve Companies of Commercial Sector which are
controlled, the ‘Group’, for the year ended 31 December 2013.
Incorporation
The Bank was founded in Cyprus in 1937 (registration number 88) as a Cooperative limited liability Company,
under Article 11 of the Cooperative Companies Law of 1923 and 1937.
Principal activities
The principal activities of the Group, which have not changed from prior year, is the provision of banking and
financial services, within the legal framework of the Cooperative Companies Law and the carrying out of
agricultural trading activities. All activities are carried out in Cyprus.
Review of development regarding the position and review of the results of the Group
The profit from ordinary activities before the provisions for impairment increased by 18,9% and amounted to €
195.680 thousands compared to € 164.531 thousands for 2012. The increase of profit is attributable mainly to the
increase in net interest income. After the charge for impairment of securities of € 16.900 thousand, the increase in
the provision for impairment of loans and other advances of € 1.868.796 thousands, and the tax charge of € 3.200
thousands, a loss for the year of € 1.697.694 thousands was generated compared to a loss of € 17.357 thousands for
2012. The significant increase in the loss is attributable mainly to the increase in the provision for impairment of
loans and other advances as a result of the negative economic climate, the increase of non-performing loans and the
continued decline in property values.
Deposits and other customer accounts as at 31 December 2013 amounted to € 13.477.149 thousands showing a
decrease of € 1.723.242 thousands or 11.3%. Loans and other advances to customers after provisions on 31
December 2013 amounted to € 10.778.140 thousands showing a decrease of € 2.468.274 thousands or 18.6%. The
Group's equity after the successful recapitalization for an amount of € 1,5 billions from the financial support
programme amounted to € 1,2 billions and the Core Tier Capital ratio to 12.1%.
Indicative consolidated financial position which includes the amount of recapitalization of € 1,5 billions is included
in note 7 of the financial statements.
Restructuring plan and strengthening of the capital base of CCS
The Cooperative Central Bank Limtied prepared a Restructuring Plan for the Cooperative Credit Sector ("CCS")
that was approved on 24 February 2014 by the European Commission. The European Commission (“EC”) states
that the measures for the recapitalization and restructuring of CCIs, are in accordance with the EU rules for
government support. The main objectives of the Restructuring Plan are:
Regaining the confidence of depositors
Decrease of operating costs and improvement of profitability
Decrease of Non-Performing Loans
Strengthening of Capital Adequacy
Strengthening the operational framework of Corporate Governance
Merge of CCIs
Downsizing branch network
As a result of the approval of the Restructuring Plan for the CCS, on 28 February 2014 the European Stability
Mechanism signed an agreement between the Ministry of Finance and the Bank for the disbursement of € 1,5 billion
for the recapitalization of the CCS and the transfer of 99% of the CCS shares to the Goverment.
COOPERATIVE CENTRAL BANK
REPORT OF THE COMMITTEE
3
Total net income
The Group's total net income for the year ended 31 December 2013 was €398.951 thousands (2012: €376.362
thousands).
Dividends
The Committee does not recommend the payment of a dividend.
Future developments
As presented in notes 1.2, 3.8-3.14 the Group’s Committee, despite of the difficult conditions that exist in the
financial sector and the ongoing recession of the economy, assures its members that will continue its efforts for the
smooth operation of both the Bank and the CCIs. Particular emphasis is given to the strict compliance of the
Restructuring Plan with the aim of strengthening the indicators of capital adequacy, ensuring a healthy liquidity
position and an effective credit risk management.
Main risks, uncertainties and risk management
The main risks and uncertainties faced by the Group and CCIs are credit risk, market risk and liquidity risk. The
Group has established a risk management framework, where prime position is held by the reliable measurement of
financial risks. The steps taken to manage these risks, are described in more detail in note 50 of the consolidated
financial statements.
Share capital
There were no changes in the share capital of the Bank during the year.
Committee
The members of the committee during the year and at the date of this report are shown on page 1. Messrs Nicolas
Hadjiyiannis, Demetris Theodotou, George Hadjinicolas, Charalambos Christodoulides, Athanasios Stavrou, George
Kittos and Panicos Pouros were appointed on 25 October 2013. Messrs George Strovolides and Lambros Pieri were
reappointed on 7 November 2013 and Efthymios Pantazis was reappointed on 22 January 2014. On the same day
Marios Clerides was appointed as a member of the Committee.
In accordance with the Specific Rules of the Bank all present members of the Committee continue in office.
Events after the reporting period
Events after the reporting period that ended 31 December 2013 until the date of approval of the consolidated
financial statements are mentioned in note 54 of the consolidated financial statements.
Related party transactions
Disclosed in note 48 of the consolidated financial statements.
Independent Auditors
The independent auditors of the Bank, KPMG Limited, expressed their willingness to continue in office.
By order of the Committee,
Chairman
Nicosia, 30 June 2014
4
Independent Auditors’ Report
To the Members of
Cooperative Central Bank Limited
Report on the consolidated financial statements of the Cooperative Central Bank Ltd
We have audited the accompanying consolidated financial statements of Cooperative Central Bank Limited (the
''Bank'') and its subsidiaries (together with the Bank, ''the Group'') on pages 7 to 87 which comprise the consolidated
statement of financial position as at 31 December 2013, and the consolidated statement of profit or loss and other
comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant
accounting policies and other explanatory information.
Committee's responsibility for the consolidated financial statements
The Committee is responsible for the preparation of consolidated financial statements that give a true and fair view
in accordance with International Financial Reporting Standards as adopted by the European Union, and the
requirements of the Cooperative Companies Law of 1985 as amended from time to time, and for such internal
control as the Committee determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
Auditors' responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those Standards require that we
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the
risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making
those risk assessments, we consider internal control relevant to the entity’s preparation of consolidated financial
statements that give a true and fair view in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the committee, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for a qualified opinion for our audit.
5
Basis for qualified opinion regarding the consolidated financial performance and the consolidated cash flows
Due to limitations placed on the extent of our work, we were unable to complete the procedures required by the
International Auditing Standards (“ISA”) 510 "Initial Audit Engagements – Opening Balances" and ISA 710
"Comparative Information - Corresponding Figures and Comparative Financial Statements" so as to have sufficient
and appropriate audit evidence as to the total assets and total liabilities of the Group as at 1 January 2013, and the
corresponding amounts as at 31 December 2012. Since the opening balances of assets and liabilities of the Group
affect the determination of financial performance and its cash flows for the year, we were unable to determine any
adjustments that might be necessary in relation to the profit / loss for the year ended 31 December 2013 that is
presented in the consolidated statements of profit or loss and other comprehensive income and changes in equity,
and in relation to the net cash flows presented in the consolidated statement of cash flows for respective year and
any adjustments to the corresponding amounts for 2012.
Qualified opinion regarding the consolidated financial performance and its consolidated cash flows
In our opinion, except for the effects of the matters mentioned in the paragraph of the basis for qualified opinion, the
consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the
year ended 31 December 2013 give a true and fair view of the financial performance and cash flows of the Group
for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European
Union, and the requirements of the Cooperative Companies Law of 1985 as amended from time to time.
Opinion regarding the consolidated financial position
In our opinion, the consolidated statement of financial position gives a true and fair view of the financial position of
the Group as at 31 December 2013, in accordance with International Financial Reporting Standards as adopted by
the European Union, and the requirements of the Cooperative Companies Law of 1985 as amended from time to
time.
Report on other legal requirements
Pursuant to the additional requirements of the Auditors and Statutory Audits of Annual and Consolidated Accounts
Laws of 2009 as amended from time to time, we report the following:
We have obtained all the information and explanations we considered necessary for the purposes of our
audit, except that the scope of our work was limited by the matters referred to in the paragraph of the basis
for qualified opinion.
In our opinion, proper books of account have been kept by the Bank so far as it appears from our
examination of these books, except as stated in the basis for qualified opinion paragraph.
The consolidated financial statements are in agreement with the books of account.
In our opinion and to the best of our information and according to the explanations given to us, the
consolidated financial statements give the information required by the Cooperative Companies Law 1985 as
amended from time to time, in the required manner except as stated in the basis for qualified opinion
paragraph.
In our opinion, the information given in the report of the Committee on pages 2 to 3 is consistent with the
consolidated financial statements.
6
Other matter
This report, including the opinion, has been prepared for and only for the Bank’s members as a body in accordance
with Section 34 of the Auditors and Statutory Audits of Annual and Consolidated Accounts Laws of 2009 as
amended from time to time and for no other purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to whose knowledge this report may come to.
Comparative figures
The comparative figures have not been audited.
Michael M. Antoniades, FCA
Certified Public Accountant and Registered Auditor
for and on behalf of
KPMG Limited
Certified Public Accountants and Registered Auditors
14 Esperidon Street
1087 Nicosia
Cyprus
30 June 2014
COOPERATIVE CENTRAL BANK LTD
The notes on pages 13 to 87 form an integral part of these consolidated financial statements.
7
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2013
2013 2012
Note
€'000 €'000
Interest income 9 886.912 918.617
Interest expense 10 (475.182) (580.700)
Net interest income 411.730 337.917
Income from fees and commissions 36.710 38.571
Expenses for fees and commissions (1.899) (3.585)
Other net losses 11 (28.306) (3.695)
Fair value loss on investment properties 27 (32.734) (11.707)
Other income 12 13.450 18.861
Total net income 398.951 376.362
Staff costs 13 (125.633) (127.410)
Depreciation 15 (13.785) (14.275)
Other operating expenses 16 (63.853) (70.146)
Total expenses (203.271) (211.831)
Operating profit before provisions for impairment 195.680 164.531
Net finance costs 17 (252) (184)
Share of results of associates before tax 31 8 19
Charge for impairment in value of investments held to maturity 26 (16.900) (2.000)
Charge for impairment of financial assets available for sale 25 (4.234) (149)
Increase in provisions for impairment of loans and other advances 21 (1.868.796) (173.963)
Loss before tax (1.694.494) (11.746)
Tax 18 (3.200) (5.611)
Net loss for the year (1.697.694) (17.357)
Other comprehensive income
Items that will not be reclassified in subsequent periods to profit or loss:
Change in the fair value of land and buildings
(22.242) (8.756)
Tax on other comprehensive income 18 (356) 79
(22.598) (8.677)
Items that may be reclassified in subsequent periods to profit or loss:
Available for sale financial assets - Fair value gains 25 3.360 2.271
3.360 2.271
Other comprehensive expense for the year (19.238) (6.406)
Total loss for the year (1.716.932) (23.763)
COOPERATIVE CENTRAL BANK LTD
The notes on pages 13 to 87 form an integral part of these consolidated financial statements.
8
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 2013
2013 2012
Note €'000 €'000
ASSETS
Cash 100.837 92.537
Deposits with central banks 19 959.275 1.167.391
Deposits with other banking institutions 20 64.133 100.969
Loans and other advances to customers 21 10.778.140 13.246.414
Inventories 22 44.676 49.078
Properties held for sale 23 83.321 59.253
Financial assets at fair value through profit or loss 24 202 148
Available for sale financial assets 25 24.825 13.034
Investments held to maturity 26 1.017.476 1.733.797
Investment properties 27 254.990 296.068
Property, plant and equipment 28 331.864 358.595
Intangible assets 29 1.685 2.343
Investments in associates 31 208 213
Other assets 32 46.959 49.750
Total assets 13.708.591 17.169.590
LIABILITIES
Amounts due to other bank institutions 33 83.600 81.004
Deposits and other customer accounts 34 13.477.149 15.200.391
Repurchase agreements 35 202.581 201.458
Other loans 36 74.206 74.275
Loans for the repayment of refugee deposits 37 36.534 36.534
Loan capital 38 - 20.110
Deferred income 39 90 98
Other liabilities 40 127.534 131.637
Total liabilities 14.001.694 15.745.507
EQUITY
Share capital 44 100.836 100.836
Reserves 45 (393.939) 1.323.247
Total equity (293.103) 1.424.083
Total equity and liabilities 13.708.591 17.169.590
Contingent liabilities and commitments 47 672.264 801.863
On 30 June 2014, the Committee of Cooperative Central Bank Limited 8uthorized these consolidated financial
statements for issue.
….................................
….................................
….................................
….................................
Chairman Vice Chairman General Manager Finance Manager
The indicative consolidated statement of financial position that includes the amount of recapitalization of €1,5
billion which results in equity of €1,2 billion is presented in note. 7.
COOPERATIVE CENTRAL BANK LTD
The notes on pages 13 to 87 form an integral part of these consolidated financial statements.
9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2013
Share
Capital
Fair value
reserve-
land and
buildings
Fair value
reserve –
available-for-
sale financial
assets
Merger
reserve
Statutory
reserve
required by
law
Profit
available for
distribution Total
Note €’000 €’000 €’000 €’000 €’000 €’000 €’000
Balance – 1 January 2012 97.855 196.706 (9.444) 38.980 1.119.311 - 1.443.408
Comprehensive income
Net loss for the year - - - - - (17.357) (17.357)
Other comprehensive income
Fair value reserve – land and buildings
Fair value gains – net of tax 28&42 - (8.112) - - - - (8.112)
Fair value reserve – available-for-sale financial assets
Fair value adjustment 25 - - 2.271 - - - 2.271
Provison for charity purposes - - - - 746 - 746
Other comprehensive income for the year - (8.112) 2.271 - 746 - (5.095)
Transactions with owners
Issue of share capital 44 2.981 - - - - - 2.981
Increase in merger reserve - - - 146 - - 146
Transfer of loss for the year - - - - (17.357) 17.357 -
2.981 - - 146 (17.357) 17.357 3.127
At 31 December 2012 100.836 188.594 (7.173) 39.126 1.102.700 - 1.424.083
COOPERATIVE CENTRAL BANK LTD CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2013
The notes on pages 13 to 87 form an integral part of these consolidated financial statements.
10
Share
Capital
Fair value
reserve-
land and
buildings
Fair value
reserve –
available-for-
sale financial
assets
Merger
reserve
Statutory
reserve
required by
law
Profit
available for
distribution Total
Note €’000 €’000 €’000 €’000 €’000 €’000 €’000
Balance 1 January 2013 100.836 188.594 (7.173) 39.126 1.102.700 - 1.424.083
Comprehensive income
Net loss for the year - - - - - (1.697.694) (1.697.694)
Other comprehensive income
Fair value reserve - land and buildings
Fair value gains - net of tax 28&42 - (21.886) - - - - (21.886)
Fair value reserve - available-for-sale financial assets
Fair value adjustment 25 - - 3.360 - - - 3.360
Provison for charity purposes 40 - - - - (1.758) - (1.758)
Other comprehensive income for the year - (21.886) 3.360 - (1.758) - (20.284)
Transactions with owners
Increase in merger reserve - - - 792 - - 792
Transfer of loss for the year - - - - (1.697.694) 1.697.694 -
- - - 792 (1.697.694) 1.697.694 792
At 31 December 2013 100.836 166.708 (3.813) 39.918 (596.752) - (293.103)
COOPERATIVE CENTRAL BANK LTD
The notes on pages 13 to 87 form an integral part of these consolidated financial statements.
11
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2013
2013 2012
Note €'000 €'000
Cash flows from operating activities
Loss before tax (1.694.494) (11.746)
Adjustments for:
Provision for impairment of loans and other advances to customers 21 1.868.796 173.963
Depreciation of property, plant and equipment 28 12.859 12.811
Amortization of computer software 29 922 1.459
Amortization of rights for use 29 4 5
Share of loss/(profit) and write offs from associates 31 4 (19)
Loss from disposal of property, plant and equipment 28 77 128
Fair value losses on investment properties 27 32.734 11.707
Fair value gains on financial assets at fair value through profit or loss 24 (49) (32)
Impairment charge on financial assets available for sale 25 4.234 149
Impairment charge on investments held to maturity 26 16.900 2.000
Impairment charge on investment properties 11 2.654 1.205
Impairment charge on available for sale properties 23 17.813 2.255
Impairment charge on property, plant and equipment 28 7.867 174
(Credit) in results for employee retirement plans 43 (4.077) -
Debit/(credit) in results for provisions for other liabilities and charges 43 216 (292)
Income from investments in treasury bills 9 (450) (2.212)
Income from investments in debt securities 9 (57.800) (70.392)
Dividend expense (23) (336)
Interest income 11 (56) (35)
Interest expense 17 33 34
Cash flows from operating activities before working capital changes 208.164 120.826
Decrease in deposits with central banks - 168.693
Decrease / (increase)in deposits with other banking institutions 10.315 (146.004)
Decrease in loans and other advances to customers 599.478 -
Increase / (decrease) in repurchase agreements 1.123 (98.575)
Decrease in inventories 4.402 7.403
(Increase) / decrease in properties held for sale (22.791) 35.632
Decrease in other assets 15.330 -
Increase in financial assets at fair value through profit or loss (5) (20)
Decrease in customer deposits and other customer accounts (1.723.738) (684.206)
Decrease in other liabilities (4.852) -
Decrease in deferred income (8) -
Cash flows used in operating activities (912.582) (596.251)
Tax (paid)/ refunded (4.955) 6.677
Payment for employee retirement schemes (1.210) (16.483)
Net cash flows used in operating activities (918.747) (606.057)
COOPERATIVE CENTRAL BANK LTD
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2013
The notes on pages 13 to 87 form an integral part of these consolidated financial statements.
12
Cash flows from investing activities
Income from investments in treasury bills 9 450 2.212
Income from investments in debt securities 9 57.800 70.392
Payment for acquisition of intangible assets 29 (268) (1.073)
Payment for acquisition of property, plant and equipment 28 (30.477) (29.547)
Payment for acquisition of investment properties 27 (4.650) (2.945)
Payment for acquisition of available for sale financial instruments 25 (12.665) (7.904)
Payment for acquisition of investments in subsidiaries 30 - 513
Payment for acquisition of investments in associates 31 - (196)
Proceeds from disposal of property, plant and equipment 28 2.289 28
Proceeds from disposal of investment properties 27 556 -
Proceeds from disposal of investments held-to-maturity 26 699.421 412.710
Interest received 56 35
Dividends received 23 336
Net cash flows from investing activities 712.535 444.561
Cash flows from financing activities
Proceeds from issue of share capital 44 - 2.981
Repayments of loan capital 38 (20.110) -
Interest paid (33) (34)
Net cash flows (used in) / from financing activities (20.143) 2.947
Net decrease in cash and cash equivalents (226.355) (158.549)
Cash and cash equivalents at beginning of the year 1.196.056 1.354.605
Cash and cash equivalents at end of the year 46 969.701 1.196.056
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
13
1. General
1.1 Incorporation
The Bank was founded in Cyprus in 1937 (registration number 88) as Cooperative limited liability company in
accordance with Article 11 of the Cooperative Companies Law of 1923 and 1937. Its registered office is located at 8
Grigori Afxentiou street, 1096 Nicosia, P.O. 24537, 1389 Nicosia.
According to the Memorandum of Understanding which was agreed between the Republic of Cyprus and the
European Central Bank, European Committee and International Monetary Fund (“Troika”) the number of
Cooperative Credit Institutions (CCIs) is reduced to 18, with the General Meetings of the Members approving the
mergers on September 2013. On 4 October 2013 the nationalization decree of the Cooperative was issued along with
the increase of the share capital to € 1.5 billions. The agreement for the granting of the debenture issued by the
European Stability Mechanism for recapitalization of the Cooperative Movement was signed on 28 February 2014.
In accordance with the Restructuring Plan, the Memorandum and the two government decrees issued on 4 October
2013 and 29 January 2014, the participation percentage of the voting rights of the Republic of Cyprus in the
ownership structure of Cooperative Central Bank (“CCB”) is 99% and of the existing shareholders is 1%. At the
same time, CCB becomes a 99% shareholder in the remaining 18 Cooperative Credit Institutions.
1.2 Public finance adjustment program and operating environment
On 25 March 2013 the negotiations between the Cyprus government and Eurogroup have been concluded, and an
agreement was reached for the provision of financial support towards the Cyprus Government of up to €10 Billions
and the development of a macroeconomic adjustment program. From the €10 Billions, €2.5 billions will be available
for the re-capitalisation of the bank institutions of Cyprus, including the Cooperative Sector, but excluding Bank Of
Cyprus Plc (“Bank of Cyprus”) and Laiki Bank Plc (“Laiki”).
Furthermore, it was decided that Bank of Cyprus and Laiki will be set under resolution assets, insured deposits and
the €9 billions provided by Emergency Liquidity Assistance (’’ELA’’) will be transferred from Laiki Bank to Bank
of Cyprus. The recapitalization procedure of Bank of Cyprus was completed in accordance with the relevant decrees
of the Resolution Authority for “Bailing - in” meaning a partial conversion of the unsecured deposits into shares.
Moreover, the holders of shares and credit securities of Bank of Cyprus have contributed towards its re-
capitalization through the absorption of losses.
In accordance with the text of the economic adjustment program the target is to overcome both the short-term and
the medium-term economic, financial and structural challenges that Cyprus is facing. The main aims of the program
are:
1. to restore the strength of the Cyprus banking sector and to gain the trust of the depositors and the market
with the thorough restructuring and downsizing of the financial institutions, the strengthening of
supervision and to address the expected capital deficiencies, in accordance with the political agreement of
the Eurogroup on the 25 March 2013,
2. to continue the current process of restructuring the public finances in order to correct the excessive
government budgetary deficit, as soon as possible, especially through measures to decrease the current
primary expenditure, and by maintaining, medium term, the restructuring of the public finances, especially
through measures to increase the productivity of the public expenditure within a short-term public finances
framework, to increase the collection of income and to improve the operation of the public sector, and
3. to implement corrective reforms in order to support the competitiveness and a sustainable and balanced
development, allowing the correction of the macroeconomic imbalances, and more specific through the
reform of the system of cost of living allowance and the removal of obstacles for the ordinary functioning
of the services markets.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
14
1. General (continued)
1.2 Public finances adjustment program and operating environment (continued)
The final text of the Memorandum of Understanding with Troika was agreed from the Board of Directors of the
European Stability Mechanism and the Cyprus Parliament and approved by the member states of the eurozone.
On 27 March 2013 the first decree was issued concerning the restrictions on the banking transactions. The scope and
duration of the restrictions are decided and revised by the Ministry of Finance and the Governor of the Central Bank
of Cyprus. The temporary restrictions on the bank transactions and cash transactions include restrictions on the
withdrawals of cash, the clearing of cheques and restrictions of money transferred on other credit institutions in
Cyprus and abroad.
On 29 March 2013, the Central Bank of Cyprus issued two decrees in relation to the Laiki and Bank of Cyprus,
implementing measures for these two banks as per The Resolution of Credit and Other Institutions Law of 2013.
On 18 April 2013, legislation was approved by the Parliament that allowed for increase of the Corporation tax from
10% to 12,5%, increasing the special contribution for defence from 15% to 30% as well as increasing the special tax
relating to credit institutions from 0,11% to 0,15%.
The Central Bank of Cyprus announced on the 24 April 2013 that an agreement was reached with the banking
institutions in Cyprus, that provides that if the deposit rate offered by the financial institutions exceeds euribor plus
300 basis points, then the financial institution must maintain additional special capital.
On 2 May 2013, the Cyprus bonds have regained the ability to be used as a collateral for the purpose of funding
from the European Central Bank, while on 13 May 2013 the European Stability Mechanism announced the decision
of its Board of Directors to release the first installment of €3 billions from the support package given to Cyprus and
the deposit of the initial €2 billions.
The Central Bank of Cyprus (CBC) having evaluated the current regulatory framework in relation to the provision
of advances, the procedure of impairment of assets and provisions and the handling of collateral for the provisions,
has started to implement regulatory amendments. On 17 February 2014 the Central Bank of Cyprus issued a decree
that covers the provisioning policy of loans and the procedures for provisions. The Decree starts with an immediate
effect and the disclosure requirements must be applied for the year 2013.
The reform of the legal framework regarding repossession and insolvency is of high importance, so that balanced
motives will be given to borrowers and lenders to negotiate and reach to an agreement regarding the restructuring of
the non-performing loans, avoiding at the same time difficult situations.
The completion of the evaluation is subject to an approval from the European Union and the International Monetary
Fund (IMF) and is expected to be reviewed from the Eurogroup, the board of directors of the European Stability
Mechanism and the executive committee of the IMF until the beginning of July.
1.3 Principal activities
The main activities of the Group, which have remained the same as the previous year, is the provision of banking
and financial services, in accordance with the legislation of Cooperative Companies and the performance of trading
activities. All activities are carried out in Cyprus.
1.4 Turnover
The turnover of the Group consists of revenue from interest, rights and commissions and other income.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
15
2. Basis of preparation
2.1 Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union (EU) and the provisions of the Cooperative Companies Laws
of 1985.
2.2 Functional and presentation currency
The consolidated financial statements are presented in Euro (€), which is the functional currency of the Bank. The
amounts presented in the financial statements are rounded to the nearest thousand unless when stated otherwise. The
functional currency is the currency of the primary economic environment in which the Group operates and in which
the elements of financial statements are measured.
2.3 Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, as amended with the
fair value estimate of land and buildings, investment properties, financial assets available for sale and the financial
assets at fair value through profit or loss.
2.4 Going concern basis
The consolidated financial statements have been prepared on a going concern basis. Despite the recent
developments in the economic environment of Cyprus, as stated in notes 1.2 and 3.8 until 3.14 of the consolidated
financial statements, the Management and the Committee of the Group have been satisfied on the basis of the
analysis in note 3.15 ,that the Group, has the means to continue its operations in the foreseeable future.
3. Use of estimates and judgments
The preparation of consolidated financial statements in accordance with IFRs requires from Management the
exercise of judgement, to make estimates and assumptions that influence the application of accounting principles of
the Group and the related amounts of assets and liabilities, disclosure of contingent liabilities and commitments as at
the date of preparation of the financial statements as well as the amounts of income and expenses. Despite the fact
that these calculations are based on the best knowledge of Management of the Bank in relation to current conditions
and actions, actual results may deviate from such estimate.
The estimates and underlying assumptions are revised on a continuous basis. Revisions in accounting estimates are
recognized in the period during which the estimate is revised, if the estimate affects only that period, or in the period
of the revision and future periods, if the revision affects the present as well as future periods.
The estimates and assumptions that have a significant risk for material adjustments within the next financial year are
presented below.
3.1 Impairment of financial assets
Assets which are presented at amortised cost are evaluated for impairment based on the explanation in note 6.22.
The loss for assets which are evaluated individually is based on the best possible estimates of the management for
the present value of the estimated future cash flows that are expected to be received. For determining these cash
flows, the management exersises its judgements about a debtor’s financial situation and the net realizable value of
any underlying collateral.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
16
3. Use of estimates and judgments (continued)
3.1 Impairment of financial assets (continued)
Impairment provision is also estimated collectively for assets that have been evaluated individually and have not
demonstrated any impairment, (incurred but not recorded) and for advances with homogenous characteristics that
have not been assessed as significant on an individual basis.
The provision for losses that have been incurred but not recorded covers the credit losses that are inherent in loans,
and investments held to maturity when there is an objective evidence that demonstrates that there are impaired
assets but these assets have not been identified.
In the evaluation for the need for collective provision, the management takes into account factors, such as the
solvency, the size of the portfolio and other economic factors. The management also uses assumptions on the
estimation of the provision based on prior experience and the current financial position. The accuracy of the
provision is contingent on the assumptions and parameters of the model that is used to determine the provision.
The Group grants loans and other facilities to customers, that are secured by guarantees of the Republic of Cyprus.
The Group does not recognize any other impairment provision due to the government guarantees. This decision of
the Group requires the exercise of significant judgment. Based on the existing information, the Group believes that
it has fulfilled all of its obligations from the current agreements with the Government and as a result it has not
recognized any provision for this category of loans.
Investments in shares are tested for impairment as explained in note 6.22. Significant or prolonged reduction in the
fair value below the costs of investments on shares is considered as objective evidence for impairment.
Investments in government bonds are tested for impairment, taking into account the solvency that is reflected on the
returns of the bonds, in the evaluations of rating agencies, the ability of the government to obtain funding from the
markets, as well as whether the state has used support mechanisms for financial support.
Investments in bonds held to maturity are subject to impairment when their book value exceeds their recoverable
amount. The recoverable amount is measured based on the present value of the expected cash flows. For the
measurement of the expected cash flows significant judgments are required, that are related to the financial position
of the issuer,the breach of contract conditions and the possibility of bankruptcy of the issuer.
3.2 Fair value estimation
The fluctuations that exist in the real estate market and the reduction in the volume of transactions have significantly
increased the uncertainty for the right estimation of the fair value of properties. Properties that the Group has for its
own use is measured at fair value less accumulated depreciation and accumulated impairment losses. The fair value
is determined from the estimation of professional surveyors, based on market indications about their current use are
take place on a regular basis, so that the book value is not substantially different from the fair value.
The investment properties owned by the Group is measured at fair value. The fair value is determined from the
estimations of professional surveyors, based on indications of the market about their current use at the end of each
year.
The fair value of the financial instruments that are not traded in the active market is determined from valuation
models. These models are reassessed periodically by specialised personnel that reconfirms their credibility. To the
greater extent possible, the valuation models are based on observable market inputs, but also on factors such as the
identification of credit risk and the volatility requiring estimations and judgments by the management. Changes in
these estimations and assumptions are likely to affect the fair value of the relevant financial instruments.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
17
3. Use of estimates and judgments (continued)
3.3 Income taxes
Significant judgment is required in determining the provision for income taxes. There are transactions and
calculations for which the final tax computation is uncertain during the ordinary course of business. The Bank
recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. In
cases where the final tax outcome of these matters is different from the amounts that were initially recorded, such
differences will impact the income tax and deferred tax provisions in the period in which such determination is
made.
3.4 Provision for obsolete and slow-moving inventories
The Bank reviews its inventories for evidence regarding the ability to the sell inventories and their net realizable
value on disposal. The provision for obsolete and slow-moving inventory is based on management’s past
experience, taking into consideration the value of inventories as well as the movement and the level of stock of each
category of inventory.
The amount of provision is recognized in profit or loss. The review of the net realisable value of the inventories is
continuous and the methodology and assumptions used for estimating the provision for obsolete and slow moving
inventories are reviewed regularly and adjusted accordingly.
3.5 Fair value of non listed treasury bills, equity securities, debt securities and derivative financial
instruments
The fair value of treasury bills, equity securities, debt securities and derivative financial instruments that are not
quoted in an active market, is determined using valuation models. These models are periodically reviewed by
qualified personnel and validated. To the greatest extent possible, models use observable data, as well as factors
such as the determination of credit risk and volatility that require management to make estimates and assumptions.
Changes in these estimates and assumptions could affect the fair value of the relevant financial instruments.
3.6 Retirement benefits
The cost of defined benefit pension plans is determined using actuarial valuations that use assumptions about
discount rates, long term rate of return on plan’s assets, future salary increases, mortality rates and future retirement
benefit increases where necessary. The Group sets these assumptions based on market expectations at the reporting
date using best estimates for each parameter, covering the period over which obligations will be settled. Due to the
long-term nature of these plans, such assumptions are subject to significant uncertainty.
3.7 Impairment of intangible assets
The intangible assets are recognised initially at cost and are depreciated using the straight line method during their
useful economic life. For the intangible assets arising from merger of companies, the cost of acquisition is the fair
value at the date of the transaction. The intangible assets with unlimited use are reviewed for impairment at least
once a year. This review is performed by discounting all future cash flows expected to arise from the use of the
intangible assets, using a discount rate reflecting the current estimations of the market and the risks related to the
asset. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable value of the cash generating unit in which the asset belongs to.
3.8 Cooperative Sector Restructuring Plan
On 14 June 2013 the Central Bank of Cyprus announced after a discussion with Troika that the final requirements of
the Cooperative Credit Institutions amounted to €1.5 billions. On 5 September 2013 the Parliament approved the
legislation regarding the supervision and nationalization of the Cooperative Sector.
During September 2013, General Meetings of the Members of the 93 Cooperative Credit Institutions were held and
approved the mergers as provided in the Restructuring Plan therefore reducing the CCIs number to 18.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
18
3. Use of estimates and judgments (continued)
3.8 Cooperative Sector Restructuring Plan (continued)
On 27 September 2013 the European Stability Mechanism announced the deposit of €1.5 billions to Cyprus, an
amount intended for the recapitalization of the Cooperative Credit Sector.
On 4 October 2013 the decree of nationalization of Cooperative Sector was issued. According to the decree, the
share capital of the Cooperative Central Bank (CCB) increases by €1.5 billions with the issue of new shares, which
are subscribed in full by the Republic of Cyprus with the provision of a bond of equivalent nominal value from the
European Stability Mechanism to CCB. The bond has a duration of 18 months, and it could either be renewed or
exchanged at its maturity date with cash. The enforcement of the decree is under the final approval of the
Cooperative Restructuring Plan from the Directorate General of Competition of the European Union.
According to the amended decree which was published in the official qazette of the Republic of Cyprus on 29
January 2014 and according to the valuation report of CCB’s shares which was performed by an independent firm,
the participation percentage and voting rights of the Republic of Cyprus in the ownership structure of CCB is ninety
nine percent (99%) and of the existing shareholders of CCB is one percent (1%). In this respect the Cooperative
Holding Company of CCB is incorporated to which all existing shareholders of CCB are transferred with
participation to its capital proportionally to the participation each shareholder had in the share capital of CCB. The
nominal value of the shares equals to one euro and twenty eight cents (€1,28) per share, according to the decree
specific deductions were made to the payroll of the Bank.
On 24 February 2014 the European Committee proceeded with the approval of the Cooperative Restructuring Plan.
The recapitalization and restructuring measures of the CCIs conform to the EU rules for state aid, as stated by the
European Committee which approved the Restructuring Plan of CCIs. On 24 March 2014 all merger procedures are
completed. Main objectives of the Restructuring plan other than the mergers are:
Regaining the confidence of depositors
Decrease of operating costs and improvement of profitability
Decrease of Non-Performing Loans
Strengthening of Capital Adequacy
Strengthening the operational framework of Corporate Governance
Downsizing of branch network
On 28 February 2014, the agreement between the Ministry of Finance, Cooperative Central Bank and European
Stability Mechanism was signed for the deposit of €1,5 billions for the recapitalization of the Cooperative Sector
and the transfer of its shares to the State.
3.9 Macro-economic environment in Cyprus
The progress of the adjustment program of the Cypriot economy has been assessed four times by Troika, and all
assessments were positive. After the update of the Memorandum of Understanding in May of 2014 the minimum
capital adequacy ratio of banks returns to 8%. According to Troika, following the fourth assessment, the program of
Cyprus remains on track while the financial targets for the first quarter of 2014 have been achieved.
The three most important challenges are the decrease of non-performing loans, maintaining the public finances in a
sustainable path and the completion of reforms. As part of the restructuring plan of Cyprus, the government has
committed to promote legislation that would ease the foreclosure of mortgages on loans of major debtors.
Progress has been recorded regarding the recapitalization and restructuring of the Cooperative Credit Sector and
banks proceed with their restructuring plans. This has allowed a significant loosening of the restrictions in domestic
transactions, in line with the roadmap of the cypriot government.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
19
3. Use of estimates and judgments (continued)
3.9 Macro-economic environment in Cyprus (continued)
The authorities have also adopted measures for the implementation of their ambitious program of structural reforms.
According to Troika, the prospects continue to be challenging despite the fact that the recession is expected to be
lower during the current year. The reduction of the GDP for the year 2014 has been revised to 4,2% from 4,8% due
to the better than expected results of 2014 and other recent indicators which suggest an improvement in trust.
The unemployment remains high and substantial non-performing loans restrict the banks’ ability to provide credit
services to the economy. As a result, it is expected that the recovery will be weaker than what was previously
projected with an increase that is expected to reach 0,4% in 2015 with a gradual improvement in the future, since the
domestic demand is restricted from the need for reduction of the high levels of debt.
Troika believes that the primary fundamental challenge is the effective decrease of non-performing loans, as it is
necessary in order to restart the granting of loans to the private sector for the support of growth and the creation of
new employment opportunities.
3.10 Regulatory Capital Indicators
During the year ended 31 of December 2013, the Group incurred significant losses, due to the substantial increase of
the provision for impairment of loans and other advances.
As part of the agreement between Troika and the Cypriot government on March 2013, the Cooperative Sector was
recapitalized with the issue of a bond from the European Stability Mechanism amounting to €1,5 billion and the
transfer of 99% of the share capital to the Government.
The core tier ratio of the Group on 31 of December 2013 would be 12,6% if the amount of the recapitalization was
accounted for in 2013. The Group aims to maintain its capital adequacy through the non distribution of profits,
while, at the same time, the restructuring and sale of noncore assets will be determined based on the risk reduction
and the capital adequacy.
From 1 January 2014, the new Capital Requirements Regulations (“CRR”) and the amended Capital Requirements
Directive IV (“CRD IV”) are in force. The Central Bank of Cyprus (“CBC”) evaluates the choices for the
implementation of transitional provisions relating to the decrease of the new indicator of the Common Equity Tier 1
Capital. On the basis of this evaluation, the CBC will set the minimum capital indicators, taking into consideration
the parameters of the evaluation of the consolidated statement of financial position and the Pan-European stress test,
in cooperation with Troika and by informing the European Stability Mechanism.
After its recapitalization, the Group complies with the minimum level for core equity capital ratio. During the year
and until the 31 of December 2013, the Group did not comply with the minimum level for core equity capital ratio.
3.11 Liquidity
The Management and Committee of the Cooperative Sector review on a daily basis the liquidity position of the
Group, which will continue to have access to liquidity facilities of the Central Banks, as per the existing rules, when
it is necessary.
The cypriot authorities have implemented in March 2013, temporary restrictive measures and capital movement
controls on bank and cash transactions. These measures provide the Group with time, in order for it to manage the
significant liquidity pressure in the local market and the risk of deposit outflows. These measures include limits in
cash withdrawals and capital movements. It is noted that the restrictive measures on capital movements within
Cyprus have been lifted in May 2014.
The Cooperative Central Bank is allowed to use liquidity facilities from the Eurosystem up to €1,95 billion
(according to the 31 May 2014 data) using as guarantee governmental bonds and the Eurobond of the European
Stability Mechanism. Additionally, there is the possibility of borrowing from the interbank market using as
guarantee the above bonds from the European Central Bank.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
20
3. Use of estimates and judgments (continued)
3.11 Liquidity (continued)
The Parliament has approved on 27 January 2014 the issue of additional government guarantees up to €2,9 billions
as a possible security in case of emergency. This gives the CCB the opportunity, in case of emergency, to issue a
covered bond as an alternative mechanism of obtaining liquidity. As a final solution, there is the possibility of
accessing the Emergency Liquidity Assistance.
It is noted that the Cooperative Sector is developing a strategy to hold and reinforce its deposit base, while
maintaining access to alternative sources of liquidity.
3.12 Profitability
The situation of the Cypriot economy and the macroeconomic environment, affects the profitability of the Group. In
2014, the percentage of the recession is expected to reach 4,2%, whereas in 2015, the GDP is expected to rise
marginally. The high percentage of unemployment is expected to continue to affect negatively the ability of
borrowers to repay their loans. It is also expected that, at least in the foreseeable future, the decline of the turnover
of small and medium enterprises will result in the same negative consequences.
According to the Restructuring Plan, independent, centralised and specialised debt recovery units have been formed,
through which the Group plans to effectively manage the recovery and restructuring of problematic loans, so as to
limit the percentage of problematic loans and provisions for impairment which are expected to arise due to the
economic environment. In addition, the Group proceeds with adopting measures to reduce operating expenses, a
profound example being the reduction in staff costs.
3.13 Stress Test
As part of the formation of a European Banking Union and more specifically of a Joint Supervisory Mechanism,
stress tests are going to take place, aiming at the assesment of the European Union’s financial institutions’ resilience
against adverse developments in the markets. The Pan-European test has been planned to provide to the supervisors,
the market competitors and institutions with fixed elements, in order to check and compare the European Union’s
banks’ resistance against adverse developments. As a first step for these tests, an Asset Quality Review is going to
be undertaken. The tests, in which amongst others the Bank of Cyprus, the Cooperative Central Bank, the Hellenic
Bank and the RCB will take part, aim to secure the consistency and comparability of the results of all banks based
on a common methodology and scenario.
As far as the lowest threshold of capital is concerned, the base scenario will correspond to 8% for the Common
Equity Tier 1 Capital, while the adverse scenario to 5,5%. At the same time, apart from the common set of risks, the
relevant authorities in each country can test the banks to risks relating to the peculiarities of each country. The Pan-
European stress tests results are expected to be announced at about the end of October 2014.
For this reason, the European Banking Authority provides the relevant authorities with a consistent and comparable
methodology, which will allow them to perform a rigorous evaluation of the resiliance of the banks under pressure
conditions.
The test has been planned in coordination with the European Central Bank, which carries out a complete evaluation
within the context of its preparation for the Single Supervisory Mechanism (“SSM”), and includes risk assessment,
asset quality control, and stress tests.
The test will be undertaken for a sample of European Union banks that represent at least 50% of every national
banking sector. The resilience of EU banks will be evaluated for a three-year period (2014-2016). Banks must set
under stress a common list of risks including those of credit risk, market risk, state risk, securitization and costs of
financing.
The conduction of the exercise includes the close cooperation between the European Banking Authority and the
Relevant Authorities in each member state, including the European Central Bank (“ECB”). More specifically, the
European Authority will be responsible for the coordination of the test in cooperation with the ECB and ensuring an
effective collaboration between the internal and external supervisors.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
21
3. Use of estimates and judgments (continued)
3.14 Uncertainties
The Management and the Committee of the Group are not in a position to predict precisely all of the developments
that could influence the Cyprus economy and the Cooperative Sector’s performance in the exercise of the Asset
Quality Review and in the Stress Tests as mentioned above, and as a result, what effect, if any, they could have on
the future financial performance, cash flows, financial position and capital of the Group. Instead, they observe
carefully the financial developments and adopt measures for maintaining the viability of the Cooperative Sector and
the management of the present situation, but also of future possible adverse developments.
The ability of the Group to continue as a going concern depends on:
The progress of the Cypriot economy, the movement of the market values of the real estate in Cyprus and the
capability of borrowers to repay their loan obligations.
The shaping of the international financial environment and especially in markets that affect Cyprus.
The successful implementation of the Restructuring Plan of the Group and the realization of the long term
macroeconomic scenario which formed the basis of its preparation.
The continuing need for maintaining and reinforcing liquidity and the availability of liquidity provision
mechanisms via the Central Bank.
The outcome of the overall evaluation of the ECB, which could reveal additional capital needs for the Group.
3.15 Evaluation of going concern
The Management and Committee of the Group, having taken into consideration the above factors and measures
taken for the support of the economy of Cyprus and the implemented and planned actions as they are presented in
the Restructuring Plan, they have been satisfied that the Group has the means of continuing its operations in the
foreseeable future. As a result the financial statements will continue to be prepared on the basis of the going concern
principle for the following reasons:
The Group has been recapitalized successfully, while there is an additional €1 billion available for the
recapitalization of the Cypriot banking system in the support program.
It is anticipated that Troika will continue to supply the necessary financial support to Cyprus in accordance with
the Memorandum.
The implementation of actions according to the Restructuring Plan will further improve the capital adequacy
and liquidity of the Group.
The liquidity indicators following the provision of the recapitalization bond are deemed adequate, while the
Organization maintains access to alternative sources of raising funds.
4. Adoption of new and revised International Financial Reporting Standards and Interpretations
During the current year, the Group adopted all the changes in IFRSs that are relevant to its operations. This adoption
did not have a material effect on the financial statements of the Group except the adoption of IAS 1 (Amendment)
“Presentation of items of Other Comprehensive Income”, where the separation of other total income into two
groups, is required, based on whether in the future it may be transferred to profits and losses of the period or not and
except the adoption of IFRS 13 “Fair Value Measurement” where additional disclosures on fair value measurement
are required.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
22
5. IFRS and Interpretations issued but not yet effective
The following Standards, Amendments of Standards and Interpretations have been issued but have not yet effective
for annual periods beginning on 1 January 2013. The Group does not intend to adopt the following standards prior to
their effective date.
(i) Standards and Interpretations adopted by the European Union
IFRS 10 ''Consolidated Financial Statements'' (effective for annual periods beginning on or after 1 January
2014).
IFRS 10 replaces the guidelines as a whole regarding control and consolidation that are provided in IAS 27 and in
Interpretation 12. The new standard alters the definition of control as a determining factor under which a financial
entity should be consolidated. This standard provides extensive clarifications that dictate the different ways in
which a financial entity (Investor) may control another entity (investment). The revised definition of control
focuses on the need of the right (or capability to direct operations that affect the returns significantly) and the
variable returns (positive, negative or both) in order to presume control. The new standard also provides
clarifications regarding the participating and protective rights as also the relationships between factoring and
factoree. The Group is currently evaluating the impact of the standard on its financial statements.
IFRS 11 ''Joint Arrangements'' (effective for annual periods beginning on or after 1 January 2014).
IFRS 11 provides a more realistic treatment of joint arrangements by focusing on the rights and obligations, instead
of their legal form. The types of joint arrangements are limited to two: either joint operations or joint ventures. The
method of proportional consolidation is no longer acceptable. It is compulsory for the participants in joint ventures
to apply the equity method. The financial entities that participate in joint operations apply the same accounting
treatment as the current participants apply in joint controlled assets or in joint controlled activities. The standard
also provides clarifications in relation to the participants in joint arrangements without the existence of joint control.
The Group is currently evaluating the impact of the standard on its financial statements.
IFRS 12 ''Disclosure of Interests in Other Entities'' (effective for annual periods beginning on or after 1
January 2014).
IFRS 12 addresses the required disclosures of a financial entity, including those of significant judgments and
assumptions, which allow the readers of financial statements to evaluate the nature, the risks and the financial
consequences that relate to the interest of a financial entity to subsidiaries, associates, joint arrangements and non-
consolidated structured entities. A financial entity has the capability to apply some or all of the above disclosures
without being obliged to apply IFRS 12 as a whole, or IFRS 10 or 11 or the amended IAS 27 or 28. The Group is
currently evaluating the impact of the standard on its financial statements.
Transitional Guidance – Amendments to IFRS 10, 11 and 12 (effective for annual periods beginning on or
after 1 January 2014).
The International Accounting Standards Board adopted an amendment to the transition provisions of these
standards. The amendment clarified that the “date of initial application” is the beginning of the annual period in
which first applied IFRS 10. If the conclusion regarding the consolidation or not of the Group at the date of initial
application is different than the one imposed by the provisions of IAS 27 and IFRIC 12, there’s only obligation for
retroactive adjustment of the previous comparative period. The presentation of retrospectively custom information
for prior periods is optional. A similar exception for presenting comparative periods’ restated information is also
provided in the modified transition provisions of IFRS 11 and 12. Moreover, the disclosures relating to non-
consolidated structured entities are not mandatory for any comparative periods prior to the first application of IFRS
12. The Group is considering the implications of the adoption of this amendment on the financial statements.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
23
5. IFRS and Interpretations issued but not yet effective (continued)
(i) Standards and Interpretations adopted by the European Union(continued)
Investment Entities Amendments to IFRS 10, 12 and IAS 27 (effective for annual periods beginning on or
after 1 January 2014).
The International Accounting Standards Board adopted the above amendment which establishes the concept of
"Investment Companies" and provides an exemption to the requirement to consolidate companies they control.
Specifically, an investment company will not consolidate its subsidiaries, nor will apply the provisions of IFRS 3
when it obtains control of another entity, but will measure its investment in subsidiaries at fair value through profit
or loss in accordance with IFRS 9. An exception to this rule are the subsidiaries that are not held for the purpose of
profiting from the investment, but to provide services related to the business of investment company. It is clarified,
however, that the parent company, of an investment company which is not itself considered an investment company,
will consolidate all entities it controls, including those controlled by the investment company. The Group is
currently evaluating the impact of the amendments on its financial statements.
IAS 27 (Revised) "Separate Financial Statements" (effective for annual periods beginning on or after 1
January 2014).
This Standard was published at the same with IFRS 10 and in combination, those two standards replace IAS 27
"Consolidated and Separate Financial Statements". The amended IAS 27 addresses the accounting treatment and
disclosures relating to the interest in subsidiaries, joint ventures and associates when a financial entity prepares
separate financial statements. At the same time, the Board transferred to IAS 27 the conditions of IAS 28
“Investments in Associates” and of IAS 31 “Investment in Joint Ventures” which relate to separate financial
statements. The Group is currently evaluating the impact of the standard on its financial statements.
IAS 28 (Revised) 'Investments in Associates and Joint Ventures "(effective for annual periods beginning on
or after 1 January 2014).
The revised IAS 28 "Investments in Associates and Joint Ventures" replaces IAS 28 "Investments in Associates".
The aim of this accounting standard is to define the accounting treatment relating to investments in associates and
to quote the requirements for the application of the equity method according to the accounting of investments in
associates and joint ventures, resulting from the publication of IFRS 11. The Group is currently evaluating the
impact of the standard on its financial statements.
IAS 32 (Amendment) "Offsetting Financial assets and Financial Liabilities" (effective for annual periods
beginning on or after 1 January 2014).
The amendments to IAS 32 clarify the possibility of offsetting financial assets and liabilities, the meaning of “for
the time being there is a legal executable right of offsetting” and that certain gross settlement systems may be
regarded as equal to net settlement. The Group is currently evaluating the impact of the standard on its financial
statements.
IAS 36 (Amendments) 'Recoverable amounts disclosures for Non-Financial Assets' (effective for annual
periods beginning on or after 1 January 2014).
The amendments introduce the disclosure of information in relation to the recoverable amount of the impaired
financial assets, provided that the amount is based on fair value less disposal costs. The Group is currently
evaluating the impact of this standard on its financial statements.
IAS 39 (Amendments) 'Novation of derivatives and continuation of hedge accounting” (effective for annual
periods beginning on or after 1 January 2014).
The amendment allows the continuation of hedge accounting in a situation where a derivative, designated as a
hedging instrument, is renewed so as to be cleared with a new central counterparty, as a result of laws or
regulations, provided certain conditions are met. The Group is currently evaluating the impact of the standard on its
financial statements.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
24
5. IFRS and Interpretations issued but not yet effective (continued)
(i) Standards and Interpretations adopted by the European Union(continued)
IFRIC 21 "Bank Levies" (effective for annual periods beginning on or after 1 January 2014).
IFRIC 21 provides guidance on when to recognize a liability for a levy imposed by a government, both for levies
accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where
the timing and amount of the levy is certain. The Group is currently evaluating the impact of this interpretation on
its financial statements.
(ii) Standards and Interpretations not yet adopted by the EU
IFRS 7 (Amendments) "Financial Instruments: Disclosures” disclosures on transition to IFRS 9 (effective for
annual periods beginning on or after 1 January 2015).
This amendment sets out disclosure requirements for transferred financial assets that are not entirely derecognised
as well as on transferred financial assets which are entirely derecognised but for which the Group has continuing
involvement. It also provides guidance on the application of the required disclosures. The Group is currently
evaluating the impact of this standard on its financial statements.
IFRS 9 "Financial Instruments" (the IASB decided temporarily to request the application of this standard
for annual periods beginning on or after 1 January 2018).
On 12 November 2009, the International Accounting Standards Board published the first phase of IFRS 9, which
upon completion will replace IAS 39. The first phase of IFRS 9 requires the classification of financial assets based
how an entity manages these instruments and the contractual cash flow characteristics of the financial assets. The
four categories of financial instruments are abolished and the financial assets are classified under one out of the two
measurement categories: amortized cost and fair value through profit or loss. The Group is currently evaluating the
impact of this standard on its financial statements.
IFRS 14 "Regulatory Deferral Accounts" (effective for annual periods beginning on or after January 1 2016).
IFRS 14 permits an entity which adopts for the first time the International Financial Reporting Standards to continue
to use, with some limited changes, certain “regulatory deferral account balances" in accordance with previous
accounting policies both on initial adoption of IFRS and in subsequent financial statements. The Group is currently
evaluating the impact of this standard on its financial statements.
IAS 19 (Amendment) "Employee Benefits" (effective for annual periods beginning on or after 1 July 2014).
The amendment clarifies the requirements according to the method used to attribute the benefits of employees or
third parties associated with the service, to the periods of service. Moreover, it allows a practical solution, if the bid
offer does not depended on the number of years of service, may, but does not require the employed benefits to be
recognized as a reduction of cost of service during the period in which the related service is provided. The Group is
currently evaluating the impact of this standard on its financial statements.
Improvements to IFRS 2010 2012 (effective for annual periods beginning on or after 1 July 2014).
In December 2013, the International Accounting Standards Board issued Annual Improvements to IFRS 2010-
2012, a collection of amendments to IFRSs in response to eight issues addressed during the 2010–2012 cycle. These
amendments reflect issues discussed by the IASB during the project which started in 2010, and that were
subsequently included in the Exposure Draft of the proposed amendments to IFRS, Annual Improvements to IFRS
2010- 2012 (published in November 2012). The Group is currently evaluating the impact of improvements in the
financial statements.
Improvements to IFRS 2011 2013 (effective for annual periods beginning on or after 1 July 2014).
In December 2013, the International Accounting Standards Board issued Annual Improvements to IFRS 2011-2013,
a collection of amendments to IFRSs in response to four issues addressed during the 2011-2013 cycle. These
amendments reflect issues discussed by the IASB during the project which started in 2011, and that were
subsequently included in the Exposure Draft of the proposed amendments to IFRS Annual Improvements to IFRS
2011-2013 (published in November 2012). The Group is currently evaluating the impact of improvements in the
financial statements.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
25
5. IFRS and Interpretations issued but not yet effective (continued)
(ii) Standards and Interpretations not yet adopted by the EU (continued)
IFRS 15, "Revenue from Contracts with Customers" (effective for annual periods beginning on or after
January 1, 2017)
The new standard may have a significant impact on how and when companies should recognize revenue from
contracts with customers. This standard replaces IAS 11 "Construction Contracts", IFRIC 3 "Cliental Loyalty
Programmes”, IFRIC 15” Agreements for real estate," IFRIC 18 "Transfers of Assets from Customers" and SIC 31
“Revenue-Barter transactions involving Advertising Services”. The standard includes a template applicable for
contracts with customers and two approaches to the recognition of revenue: at one point in time or over time.
Explanation of acceptable methods of depreciation and amortization - Amendments to IAS 16 and IAS 38
(effective for annual periods beginning on or after January 1 2016)
The amendments to IAS 38 “Intangible assets” introduce the prerequisite that the use of revenue as a basis for
calculating the amortization for intangible assets is inappropriate. This presumption can be overcome only when
revenue and the consumption of the economic benefits of the intangible asset are highly correlated or when the
intangible asset is presented as a measure of revenue. The amendments to IAS 16 “Property, Plant and Equipment”
state that the use of revenue as a basis for the calculation of depreciation for property, plant and equipment is
inappropriate.
IFRS 11 (Amendment), "Accounting for the acquisition of interests in Joint Ventures" (effective for annual
periods beginning on or after January 1, 2016)
The amendment clarifies that the accounting treatment applicable to business combinations also applies to the
acquisition of additional interest in a joint venture while the joint venturer retains joint control. The additional shares
acquired should be measured at fair value. The previous interest held by the joint ventures should not be
remeasured.
The Committee does not expect that the implementation of these standards in future periods will have a material
impact in the consolidated financial statements of the Group.
6. Significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out
below. These policies have been consistently applied to all years presented in these consolidated financial
statements unless otherwise stated.
The presentation of the comparatives in the consolidated statement of profit and loss and comprehensive income has
changed in order to correspond with the adoption of IAS 1 (Amendment) “Presentation of items Oo Other
Comprehensive Income”.
6.1 Basis of Consolidation
The Company has subsidiary undertakings and as per the International Financial Reporting Standards consolidated
financial statements should be prepared and submitted to the Bank at the Annual General Meeting. The consolidated
financial statements incorporate the financial statements of the Board and entities (including special purpose
entities) controlled by the Board (its subsidiaries). Control is achieved where the Board has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated
statement of profit or loss and other comprehensive income from the effective date of acquisition and up to the
effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of
the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit
in balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
in line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
26
6. Significant accounting policies (continued)
6.1 Basis of Consolidation (continued)
Minority interest – Financial Institutions
As at the year end, CCB exercised effectively full control of the Cooperative Credit Institutions. The formation of
the 99% percentage occured in 2014 after the publication of the related decree by the Ministry of Finance. As a
result, at the end of the year no minority interest is recognised.
Minority interest – Non-Financial Institutions
During the year end there was a minority interest in some of the companies with trading operations. The information
that exists for the estimation of the relevant amounts is approximate. In addition, the minority interest of these
companies in its total has been assessed as not material in relation to these consolidated financial statements, and
therefore no minority interest in these consolidated financial statements has been recognised.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between
(i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the
previous carrying value of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling
interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative
gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously
recognised in other comprehensive income and accumulated in equity are accounted for as if the Group had directly
disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as
specified by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when
control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial
Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in
an associate or a jointly controlled entity.
6.2 Transactions under common control
A business combination involving entities or businesses under common control is a business combination in which
all of the combining entities or businesses are ultimately controlled by the same party or parties both before and
after the combination, and that control is not transitory
Business combination of companies under common control
Business combination of companies regarding entities which are, in the end, controlled by the same party or parties
before and after the business combination and this control is not transitory, is treated using the uniting of interest
method. The principles of uniting of interests method are:
The Group does not adjust the assets and liabilities at fair value but instead incorporates assets and liabilities at
book values as shown in the books of the acquired company adjusted to achieve alignment with the accounting
policies of the Company.
The merger reserve is created from the difference between the share capital of CCIs and the companies of the
trading sector which are consolidated and for which there was no equivalent investment cost in the books of
CCB and the cost of investment in the share capital of CCB in the books of CCIs.
The consolidated financial statements incorporate the profit or loss of acquired companies which were absorbed,
as if the companies (acquirer and acquiree) were consolidated from the date which common control was first
established. As a result the consolidated financial statements reflect the profit or loss of all the companies
absorbed during the entire period even if the merger was performed during the period. Moreover, the
corresponding amounts of the previous period reflect the consolidated profit or loss of the companies absorbed
even though the transaction occurred in the current period.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
27
6. Significant accounting policies (continued)
6.3 Interest income and expense
Interest income and expense are recognized in profit or loss using the effective interest method. The ‘effective
interest rate’ is the rate that exactly discounts the estimated future cash payments and receipts through the expected
life of the financial asset or financial liability to the carrying amount of the financial asset or financial liability. The
effective interest rate is calculated at the initial recognition of the financial instrument and it is not revised at a later
date.
Income from interest of loans granted to customers which correspond to the amount of impairment loss, are deferred
and recognized in profit and loss when received.
6.4 Fee and commission income and expenses
Fee and commission income is recognized on an accrual basis in the period the services occured, whereas fees and
commissions in respect of loans and other advances are recognized in profit or loss using the effective interest rate
method.
6.5 Rental income
Rental income is recognized on an accrual basis in a straight line method over the life of the lease.
6.6 Income from investments in securities
Dividend from investments in securities is recognized when the right of the Group to receive payment is established.
Withheld taxes are transferred to profit or loss. Interest income from investments in securities is recognized on an
accrual basis.
Profit or loss from the sale of investments in securities that represents the difference between the net proceeds and
the carrying value of the investments disposed is transferred to profit or loss.
6.7 Interest income
Interest income is recognized on a time proportion basis using the effective interest method.
6.8 Investments in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an
interest in a joint venture. Significant influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those policies.
The results, assets and liabilities of associates are incorporated in these consolidated financial statements using the
equity method unless the investments are classified as available for sale, where they are treated according to IFRS 5
“Non-Current Assets Held For Sale and Discontinued Operations”. According to the equity method, the investment
in an associate is recognized firstly in the consolidated statement of financial position at cost and then adjusted to
recognize the share of the Group in the profit or loss and other comprehensive income of the associate. When the
share of the Group is greater than the losses of an associate (which includes every long term participation which, in
fact, is part of the net investment of the Group in the associate), the Group ceases to recognize its excess share
losses. Additional losses are recognized only in the occasion that the Group has been charged with legal or
constructive commitments or has made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities
and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is
included within the carrying value of the investment. Any excess of the Group's share of the net fair value of the
identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised
immediately in profit or loss.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
28
6. Significant accounting policies (continued)
6.8 Investments in associates (continued)
The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with
respect to the Group’s investment in an associate. When necessary, the entire carrying value of the investment
(including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by
comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying value.
Any impairment loss recognised forms part of the carrying value of the investment. Any reversal of that impairment
loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment
subsequently increases.
When a Group entity transacts with its associate, profits and losses resulting from the transactions with the associate
are recognised in the Group' consolidated financial statements only to the extent of interests in the associate that are
not related to the Group.
6.9 Foreign currencies
Foreign currency transactions are translated in the functional currency using the exchange rate ruling at the date of
the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated into Euro at the rate of exchange
ruling at the reporting date. All differences arising on translation are recognized in the profit or loss.
Non-monetary items denominated in foreign currency and measured at historic cost are translated using the
exchange rates ruling as at the dates of the initial transactions.
6.10 Segmental reporting
Operating segments are presented according to the internal reporting provided to the chief operating decision maker.
The chief operating decision maker is the person or group of persons responsible for the allocation of resources to
operating segments and the assessment of their performance. The Bank has identified the Committee as its chief
operating decision-making body.
6.11 Retirement benefit costs
The Group and the employees contribute to the Government Social Insurance Fund based on the salary of the
employees. In addition, the Group follows a Defined Benefit Plan (Provident Fund), the assets of which are kept in a
separate account. The plan is funded by payments made by the employees and the Group. The contributions of the
Group are written off in the period they relate to and are included to the employee costs. The Group does not have
any legal or implied liability to pay extra contributions if the plan does not have sufficient funds to pay all the
employees for benefits relating to their services during the current and previous periods.
6.12 Taxation
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it
relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax liabilities and assets for the current and prior periods are measured at the amount expected to be paid to
or recovered from the taxation authorities, using the tax rates and laws that have been enacted, or substantively
enacted, by the reporting date and any adjustment to tax payable or receivable in respect of previous years.
The Group is not subject to income tax on income from transactions with Members.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the
consolidated statement of financial position and the corresponding tax bases. Deferred tax assets are recognised to
the extent that it is probable that future taxable profit will be available against which the temporary differences can
be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profits will be realised.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
29
6. Significant accounting policies (continued)
6.12 Taxation (continued)
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset realised taking into account the tax rates that were enacted or substantially enacted by the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
6.13 Special Levy
According to the “Special Levy on Credit Institutions Law of 2011”, approved on 14 April 2011, a special levy, for
the years 2011 and 2012, on credit institutions was imposed at the rate of 0,095% on qualifying deposits held by
each credit institution at 31 December of the year preceding the year of taxation. Amendments which were
approved on 21 December 2012, applying the terms of the Memorandum between the Republic of Cyprus and the
lenders, provide for the extension of the validity of the relevant law, increase of the special levy tax to 0,11% and
the deletion of provision under which the tax paid should not exceed 20% of the total taxable profits of the credit
institution assessed by the Director of Inland Revenue. A subsequent amendment to the Law, published in the
Governmental Gazette on the 29th of April 2013, provided for an increase rate to the special levy of 0,15%. Based
on new Law amendment published in the Governmental Gazette on the 26th of July 2013 the special levy, from the
year 2013 and thereafter, is calculated on a quarterly basis at the rate of 0,0375% on qualifying deposits held by
each credit institution as at 31 December, 31 March, 30 June and 30 September of each year.
On 22 March 2013, the Law on the Establishment and Operation of the Deposit Protection and Resolution of Credit
and Other Institutions Scheme, as well as for relevant matters, was enacted and the Law on the Establishment and
Operation of the Independent Financial Stability Fund of 2011, which was applicable from 1st of January 2013, was
repealed.
Based on the provisions of the new Law, two Funds are operated (The Deposit Protection and Resolution of Credit
and Other Institutions) and their Funds are made up of:
1. The Deposit Protection Fund – transfer of the total of the account, in which the contributions of the credit
institutions were deposited, based on the provisions of article 34 of the Banking Operations Law. Regular or
extraordinary contributions to be imposed by the Management Committee of the Fund, loans, income from
investments, donations and other income.
2. The Resolution of Credit and Other Institutions Fund – transfer of 25/60 of total revenue from the imposition of
special levy, original or extraordinary contributions to be imposed by the Management Committee of the Fund,
amounts derived from possible sanctions imposed on the affected institutions, loans, income from investments,
donations and other income.
6.14 Property, plant and equipment
Land and buildings are carried at fair value, based on valuations by external independent valuers, less subsequent
depreciation for buildings. Revaluations are carried out with sufficient regularity such that the carrying value does
not differ materially from that which would be determined using fair value at the reporting date. All other property,
plant and equipment are stated at historical cost less depreciation.
Increases in the carrying value arising on revaluation of property, plant and equipment are credited to fair value
reserves in equity. Decreases that offset previous increases of the same asset are charged against that reserve; all
other decreases are charged to profit or loss. Each year the difference between depreciation based on the revalued
carrying value of the asset (the depreciation charged to profit or loss) and depreciation based on the asset's original
cost is transferred from fair value reserves to retained earnings.
Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet
determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for
qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Depreciation of
these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
30
6. Significant accounting policies (continued)
6.14 Property, plant and equipment (continued)
Depreciation is calculated on the straight-line method so as to write off the cost or revalued amount of each asset to
its residual value, over its estimated useful life.
The annual depreciation rates used are as follows:
Buildings 3%-10%
Plant and equipment 10%-20%
No depreciation is calculated on land and on properties under construction.
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
Where the carrying value of an asset is greater than its estimated recoverable amount, the asset is written down
immediately to its recoverable amount.
Expenditure for repairs and maintenance of property, plant and equipment is charged to profit or loss of the year in
which it is incurred. The cost of major renovations and other subsequent expenditure are included in the carrying
value of the asset when it is probable that future economic benefits in excess of the originally assessed standard of
performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining
useful life of the related asset.
The book value of property, plant and equipment is reviewed for impairment when events or changes in conditions
indicate that the book value may not be recoverable. If there is such an indication and the book value is higher than
the estimated recoverable amount, then the book value of the asset is impaired to the recoverable amount. The
recoverable amount of property, plant and equipment is the higher amount between net selling price and value in
use.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an
item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying
value of the asset and is recognised in profit or loss. When revalued assets are sold, the amounts included in the fair
value reserves are transferred to retained earnings.
6.15 Deferred income
Deferred income represents income receipts which relate to future periods.
6.16 Deferred income from government grants
Government grants on non-current assets acquisitions are recorded as deferred income and recognised as income on
a systematic and rational basis over the useful life of the asset. Grants are recognised when there is reasonable
assurance that the Group will comply with the conditions attached to them and that the grants will be received.
Government grants that relate to expenses are recognised in profit or loss as revenue.
6.17 Investment Properties
Investment properties include investments in land and buildings held for rental and/ or for capital appreciation,
instead of use in the ordinary course of business or for sale. Investment properties are initially recognised at cost
which includes the expenses arising from the transaction and subsequently measured at market value at year end.
Fair value of property is determined annually by independent valuers before deducting any expenses that the Group
will incur during the sale of the assets.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
31
6. Significant accounting policies (continued)
6.17 Investment Properties (continued)
Gains or losses arising from revaluation of investment properties that is included in the results of the year,
represents the difference between the market value at the end of the year and the market value at the beginning of
the year or the cost of investment properties purchased during the year.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn
from use and no future economic benefits are expected from the continued use of the asset. Any gain or loss arising
on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying
value of the asset) is included in profit or loss in the period in which the property is derecognised.
6.18 Properties held for sale
Properties held for sale are measured at the lower of cost or net realisable value.
6.19 Computer software
Costs that are directly associated with identifiable and unique computer software products controlled by the Group
and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible
assets. Subsequently computer software is carried at cost less any accumulated amortisation and any accumulated
impairment losses. Expenditure which enhances or extends the performance of computer software programmes
beyond their original specifications is recognised as a capital improvement and added to the original cost of the
computer software. Costs associated with maintenance of computer software programmes are recognised as an
expense when incurred. Computer software costs are amortised using the straight-line method over their useful
lives, not exceeding a period of three years. Amortisation commences when the computer software is available for
use and is included within administrative expenses five years. Amortisation commences when the computer
software is available for use.
The residual value and useful economic life are reviewed and adjusted at every reporting period, if it is considered
necessary.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the
disposal proceeds and the carrying value of the asset, are recognised in profit or loss when the asset is derecognized.
6.20 Operating Leases
Leases, where substantially all risks and rewards of ownership of an asset are transferred to the lessee, are classified
as finance leases. All other lease agreements are classified as operating leases.
The Group has only entered into operating lease agreements for property either as a lessor or as a lessee.
For operating leases where the Group is the lessor, the leased property is recognised as an asset of the Group and is
depreciated over its useful life. Rental income from operating leases is recognized in the consolidated statement of
profit or loss and other comprehensive income on a straight line basis over the period of the lease.
For operating leases where the Group is the lessee, the leased property is not recognised as an asset of the Group.
Rental expenses made under operating leases are charged to the profit or loss on a straight line basis over the period
of the lease.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
32
6. Significant accounting policies (continued)
6.21 Financial Instruments
6.21.1 Recognition
The Group initially recognises loans and other advances to customer, deposits to customers and debt securities
issued on the date on which they are originated. All other financial instruments are recognized on the trade date,
which is the date on which the Group becomes a party to the contractual provisions of the instrument. A financial
asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss,
transaction costs that are directly attributable to its acquisition or issue.
The Group classifies its financial assets as following:
Loans and advances to customers
held to maturity
available for sale
at fair value through profit or loss
The Group classifies its financial liabilities as liabilities at amortized cost.
6.21.2 Derecognition
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset
expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the
risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor
retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
Rights or obligations that were created or retained by the Group during the transfer are recognised as an asset or
liability On derecognition the difference between the carrying amount of the asset and the sum of the consideration
and any gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.
The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire.
.
6.21.3 Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position
when, and only when, the Group has a legal right to set off the amounts and it intends either to settle them on a net
basis or to realise the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under the accounting standards, or for gains
and losses arising from a group of similar transactions.
6.21.4 Measurement at amortised cost
The ‘amortised cost’ of a financial asset or financial liability is the amount at which the financial asset or financial
liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation
using the effective interest method of any difference between the initial amount recognised and the maturity amount,
minus any reduction for impairment.
6.21.5 Fair value measurement
Applies from 1 January 2013 onwards
‘Fair value’ is the price that would be received from the disposal of an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the main or, in its absence, the most
advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-
performance risk.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
33
6. Significant accounting policies (continued)
6.21 Financial Instruments (continued)
6.21.5 Fair value measurement (continued)
Applies from 1 January 2013 onwards (continued)
When available, the Group measures the fair value of an instrument using the quoted price in an active market for
that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient
frequency and volume to provide pricing information on an ongoing basis.
If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of
relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique
incorporates all of the factors that market participants would take into account in pricing a transaction.
The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price –
i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial
recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active
market for an identical asset or liability nor based on a valuation technique that uses only data from observable
markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the
fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss
on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by
observable market data or the transaction is closed out.
If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and
long positions at a bid price and liabilities and short positions at an ask price.
Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed
by the Group on the basis of net exposure to either market or credit risk are measured on the basis of a price that
would be received to sell a net long position (or paid to transfer a net short position) for a particular risk exposure.
Those portfolio level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk
adjustment of each of the individual instruments in the portfolio.
The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on
which the amount could be required to be paid.
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period
during which the change has occurred.
Applies prior1 January 2013
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,
willing parties in an arm’s length transaction on the measurement date.
When available, the Group measures the fair value of an instrument using quoted prices in an active market for that
instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual
and regularly occurring market transactions on an arm’s length basis.
If a market for a financial instrument is not active, then the Group determines fair value using a valuation technique.
The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates
specific to the Group, incorporates all factors that market participants would consider in setting a price and is
consistent with accepted economic methodologies for pricing financial instruments.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price i.e. the fair
value of the consideration given or received. However, in some cases the initial estimate of fair value of a financial
instrument on initial recognition may be different from its transaction price. If this estimated fair value is evidenced
by comparison with other observable current market transactions in the same instrument (without modification or
repackaging) or based on a valuation technique whose variables include only data from observable markets, then the
difference is recognised in profit or loss on initial recognition of the instrument.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
34
6. Significant accounting policies (continued)
6.21 Financial Instruments (continued)
6.21.5 Fair value measurement (continued)
Applies before 1 January 2013 (continued)
In other cases, the fair value at initial recognition is considered to be the transaction price and the difference is not
recognised in profit or loss immediately but is recognised over the life of the instrument on an appropriate basis or
when the instrument is redeemed, transferred or sold, or the fair value becomes observable.
If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and
long positions at a bid price and liabilities and short positions at an ask price. Where the Group has positions with
offsetting risks, mid-market prices are used to measure the offsetting risk positions and a bid or ask price adjustment
is applied only to the net open position as appropriate.
The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on
which the amount could be required to be paid.
6.21.6 Loans and receivables
Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in
an active market and the Group has no intention for trading immediately or in the foreseeable future. Loans and
receivables include advances to customers and banks.
Loans and receivables are recognized initially at fair value plus any attributable transaction costs and are are
subsequently measured at amortised cost using the effective interest rate method, less any provision for impairment.
6.21.7 Receivables from trade operations
Trade receivables are initially measured at fair value and are subsequently measured at amortised cost using the
effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit
or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the
difference between the asset's carrying amount and the present value of estimated future cash flows discounted at
the effective interest rate computed at initial recognition.
6.21.8 Investments
The Group classified its financial assets that comprise of investments in the following four categories. The financial
assets are classified in the above categories upon initial recognition based on their characteristics and the purpose of
their acquisition.
(i) Held to maturity investments
‘Held to maturity investments’ are non-derivative assets with fixed or determinable payments and fixed maturity
that the Group has the positive intent and ability to hold to maturity, and which are not designated as at fair value
through profit or loss or as available for sale.
After initial recognition held-to-maturity investments are carried at amortised cost using the effective interest
method, less any impairment losses.
A sale or reclassification of a significant amount of held to maturity investments would result in the reclassification
of all held to maturity investments as available for sale, and would prevent the Group from classifying investment
securities as held-to-maturity for the current and the following two financial years.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
35
6. Significant accounting policies (continued)
6.21 Financial Instruments (continued)
6.21.8 Investments (continued)
(ii) At fair value through profit or loss
Financial assets at fair value through profit or loss are allocated to the following categories:
(a) Assets for commercial use
(b) Assets designated at fair value through profit or loss at initial recognition
Changes in fair value assets that are designated at assets at fair value through profit or loss fair value are included in
profit or loss.
(iii) Available for sale
Available for sale investments are non-derivative investments that are designated as available for sale or are not
classified in any other category of financial assets. Available for sale investments comprise equity securities and
debt securities.
Investments in unquoted equity securities for which the fair value cannot be reliably measured are classified as
financial assets at cost. The category includes the investments in Cooperative Credit Institutions. The Cooperative
Companies Law does not allow the transfer of shares which are held by a Cooperative Credit Institutions to a third
party who is not already a member of the Cooperative Credit Institutions and the transfer of shares between
members cannot be completed unless there is an approval of the Committee of the Cooperative Credit Institutions.
In addition, each member-shareholder of a cooperative credit institution holds only one vote irrespective of the
number of shares held.
The remaining available for sale financial assets are measured at their fair value after initial recognition. Gains and
losses arising from changes in the fair value are directly recognized in equity with the exception of impairment
losses. On disposal or impairment of the investments, the cumulative gain or loss which was previously recognized
in equity, is recognized in profit or loss for the period.
6.21.9 Deposits and other customer accounts
After initial recognition they are measured at amortised cost, using the effective interest rate method apart from
some specific deposits associated with derivatives which the Group has decided to classify as assets at fair value
through profit or loss, for which any changes at fair value are recognised in the consolidated statement of profit or
loss and other comprehensive income.
6.21.10 Cash and cash equivalents
Cash and cash equivalents for the purposes of the consolidated statement of cash flows consist of cash, in hand and
at banks and equivalent securities that can be liquidated immediately.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
36
6. Significant accounting policies (continued)
6.21 Financial Instruments (continued)
6.21.11 Loans payable
Loans are recognized at the initial amount of proceeds received, net of financing costs . Loans are subsequently
stated at amortized cost. Any differences between the proceeds (net of costs) and the repayment value is recognized
in profit or loss over the duration of the loan using the effective interest method.
6.22 Impairment
6.22.1 Financial assets
At each reporting date, the Group assesses whether there is objective evidence that financial assets not carried at fair
value through profit or loss are impaired.
Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial
recognition of the assets and that the loss event has an impact on the future cash flows of the assets that can be
estimated reliably.
Objective evidence that financial assets are impaired may include default or delinquency by the borrower,
restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider, indications
that the borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other
observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in
the group, or economic conditions that correlate with defaults in the group. In addition, for an investment in an
equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.
The Group evaluates whether valid evidence of probable impairment exist in its loan portfolio at both on individual
and on collective basis. All individually significant loans are assessed for individual impairment. All individually
significant loans that were individually assessed but found not to be individually impaired are then collectively
assessed for any impairment that has been incurred but not yet recorded. Loans that are not individually significant
are then collectively assessed for any impairment by grouping together loans with similar risk characteristics. The
calculation of the provision for impairment is based on the Group’s assessment in relation to the historical trends of
losses demonstrated by the relevant groups with similar risk characteristics.
Impairment losses on assets measured at amortised cost are calculated as the difference between the carrying
amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate.
If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one
due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be
derecognised. If the cash flows of the renegotiated asset are substantially different, then the contractual rights to
cash flows from the original financial asset are deemed to have expired and the original financial asset is
derecognised and the new financial asset is recognised at fair value.
Impairment losses are recognised in profit or loss and reflected in an allowance account against loans and
receivables or held to maturity investment securities. Interest on the impaired assets continues to be recognised
through the unwinding of the discount. The Group examines whether there are any valid indications for impairment
for investments held to maturity on an individual basis.
If an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, then
the decrease in impairment loss is reversed through profit or loss.
When there is objective evidence that an available for sale investment is impaired, the cumulative loss that had been
recognised in equity is reclassified from equity to profit or loss. The amount of the cumulative loss that is
reclassified from equity to profit or loss is the difference between the acquisition cost (net of any principal
repayment and amortisation) and current fair value, less any impairment loss on that investment previously
recognised in profit or loss.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
37
6. Significant accounting policies (continued)
6.22 Impairment (continued)
6.22.1 Financial assets (continued)
If, in a subsequent period, the fair value of an impaired available for sale debt security increases and the increase can
be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the
impairment loss will be reversed, with the amount of the reversal recognised in profit or loss. Any future increase in
fair value is recognized in other comprehensive income. The Group writes off a loan or an investment debt security,
either partially or in full, when it determines that there is no realistic prospect of recovery.
6.22.2 Non financial assets
The carrying amounts evaluated the Group’s non-financial assets (other than investment properties and deferred tax
receivable) are reviewed at each reporting date to determine whether there is any indication of impairment. If any
such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less
costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset.
An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its estimated
recoverable amount. Impairment losses are recognised in profit or loss.
The loss from impairment of other non financial assets is reversible only to the extent that the carrying value does
not exceed net carrying value that the financial asset would had if the impairment loss was not recognized.
6.23 Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that
can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability. When the Group
expects a provision to be repaid, for example under an insurance contract, the repayment is recognized as a separate
asset only when the repaymentt is virtually certain.
6.24 Non-current liabilities
Non-current liabilities represent amounts that are due more than twelve months from the date of the consolidated
statement of financial position.
6.25 Repurchase agreements
Securities sold subject to repurchase agreements (‘repos’) continue to be recognised in the statement of financial
position. The proceeds from the sale of the securities are recognised as ‘Repurchase Agreements’. Securities
purchased, on condition that they will be resold in the future (‘reverse repos’), are not recognised in the statement of
financial position. The amounts paid for purchase thereof are recognised as ‘Reverse Repos Agreements’. The
difference between the sale and repurchase consideration is recognised as interest income or expense over the life of
the repurchase agreement using the effective interest rate method.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
38
6. Significant accounting policies (continued)
6.26 Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the
holder for a loss incurred because a specified debtor failed to make payments when due, in accordance with the
terms of a financial instrument.
Guarantees and documentary credits are the financial guarantees the Group provides to its customers.
Financial guarantees are initially recognised at fair value on the date the guarantee was granted. Because all
guarantees agreed are on normal commercial terms and the value of the premium agreed corresponds to the value of
the guarantee obligation, the fair value of a financial guarantee is zero, initially.
Subsequent to initial recognition, the Bank’s liabilities under such guarantees are measured at the higher of the
initial amount, less cumulative amortisation of fees, which are recognised as income on a straight line basis during
the guarantee period and the net present value of the best estimate of the amount required to settle the probable
obligation as a result of the guarantee.
6.27 Inventories
Inventories are stated at the lower of cost and net realizable value. The cost is determined using the weighted
average method. Net realizable value is the estimated selling price in the ordinary course of business, less the costs
to completion and selling expenses.
6.28 Share capital
Shares issued and fully paid are recognized at nominal value and are classified as share capital which is included in
equity.
6.29 Dividends
Dividends payable are recognized as a liability in the financial statements of the Bank in the year in which they are
approved for payment. In particular, interim dividends are recognised as a liability in the year in which they are
approved by the Committee of the Bank. Final dividends are recognised in the year in which they are approved by
the members of the Bank.
6.30 Events after the reporting period
Assets and liabilities are adjusted for events incurred during the period between the reporting period and the date
that the financial statements are approved by the Committee, in cases where these events offer additional
information on the valuation of amounts relative to conditions existing at the reporting date.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
39
7. Pro forma consolidated statement of financial position
The Group as part of its recapitalization received on 28 February 2014 a capital injection from the Cyprus
Government amounting to € 1,5 billions in the form of a bond of the European Stability Mechanism, giving in
exchange 99% of the CCB shares.
The following consolidated statement of financial position presents the financial position of the Group as at 31
December 2013 as if the recapitalization of €1,5 billions from the Government took place on 31 December 2013.
The relevant adjustments relate to presenting an increased share capital of € 1,5 billions and the inclusion in the
assets of the Eurobond issued by the European Stability Mechanism in the investments held to maturity.
2013
€'000
ASSETS
Cash 100.837
Deposits with central banks 959.275
Deposits with other banking institutions 64.133
Loans and other advances to customers 10.778.140
Inventories 44.676
Properties held for sale 83.321
Financial assets at fair value through profit or loss 202
Available for sale financial assets 24.825
Investments held to maturity 2.517.476
Investment properties 254.990
Property, plant and equipment 331.864
Intangible assets 1.685
Investments in associates 208
Other assets 46.959
Total assets 15.208.591
Liabilities
Amounts due to other banks 83.600
Deposits and other customer accounts 13.477.149
Repurchase agreements 202.581
Other loans 74.206
Loans for the repayment of refugee deposits 36.534
Deferred income 90
Other liabilities 127.534
Total liabilities 14.001.694
Equity
Share capital 1.600.836
Reserves (393.939)
Total equity 1.206.897
Total equity and liabilities 15.208.591
Taking into consideration the recapitalization amount of €1,5 billions and the revaluation reserves, the equity ratio
amounts to 12.1%.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
40
8. Segmental analysis
Banking,
financial and
insurance
services
Trading
activities Total
€'000 €'000 €'000
2013
Net interest income/expense 412.033 (303) 411.730
Fees and commissions income 36.616 94 36.710
Fees and commissions expense (1.899) - (1.899)
Other losses / income (68.009) 20.419 (47.590)
Total net income 378.741 20.210 398.951
Staff costs (109.939) (15.694) (125.633)
Depreciation (10.507) (3.278) (13.785)
Other operating expenses (44.868) (18.985) (63.853)
Total expenses (165.314) (37.957) (203.271)
Operating profit before impairment provisions 213.427 (17.747) 195.680
Charge for impairment in value of investments held to maturity (16.900) - (16.900)
Increase in provisions for impairments of loans and other
advances (1.868.747) (49) (1.868.796)
Other expenses (4.478) - (4.478)
Loss before tax (1.676.698) (17.796) (1.694.494)
2012
Net interest income/expense 338.101 (184) 337.917
Fees and commissions income 38.471 100 38.571
Fees and commissions expense (3.585) - (3.585)
Other losses / income (21.536) 24.995 3.459
Total net income 351.451 24.911 376.362
Staff costs (110.787) (16.623) (127.410)
Depreciation (10.368) (3.907) (14.275)
Other operating expenses (56.061) (14.085) (70.146)
Total expenses (177.216) (34.615) (211.831)
Operating profit before impairment provisions 174.235 (9.704) 164.531
Charge for impairment in value of investments held to maturity (2.000) - (2.000)
Increase in provisions for impairment of loans and other
advances (173.963) - (173.963)
Other expenses (314) - (314)
Loss before tax (2.042) (9.704) (11.746)
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
41
9. Interest income
2013 2012
€'000 €'000
Loans and other advances to clients 825.716 841.690
Deposits in Central Bank of Cyprus 1.060 1.685
Deposits in other bank institutions 1.886 2.638
Treasury bills 450 2.212
Debt securities 57.800 70.392
886.912 918.617
10. Interest expense
2013 2012
€'000 €'000
Deposits from customers 472.396 575.564
Loans payable 1.042 1.331
Repurchase agreements 1.122 1.542
Bonds 31 1.304
Amounts due to other banks 584 955
Loan Commissioners- Agricultural Development 7 4
475.182 580.700
11. Other net losses
2013 2012
€'000 €'000
Net loss from disposal of property, plant and equipment (77) (128)
Fair value gains on financial assets at fair value through profit or loss 49 32
Credit interest 56 35
Impairment charge on investment properties (2.654) (1.205)
Impairment charge on properties held for sale (17.813) (2.255)
Impairment charge on properties, plant and equipment (7.867) (174)
(28.306) (3.695)
12. Other income
2013 2012
€'000 €'000
Net income on trading in foreign currencies 854 929
Gross profit from trading sector 5.663 6.243
Government grants 40 4.327
Proceeds from trading sector debtors which were written off 46 -
Rents receivable 4.411 4.921
Sundries 2.436 2.441
13.450 18.861
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
42
13. Staff costs
2013 2012
€'000 €'000
Wages and salaries 97.870 97.624
Social insurance costs and other Government funds 8.365 8.313
Other contributions 3.627 3.414
Social cohesion fund 1.908 1.916
Special contribution 296 291
Provident fund contributions 9.221 10.341
Expenses for early retirement plan 1.420 1.078
Costs for defined retirement benefit plan (Notes 6.11 and 14) 1.289 2.275
123.996 125.252
Other staff costs 1.637 2.158
125.633 127.410
Average number of employees (including Committee Members in their executive
capacity) 2.973 3.086
Reduction of CCS payroll
According to the Restructuring Plan, it was decided to reduce the payroll of the Group by an average of 15%. This
reduction was achieved by scaled reduction of the wages and by decreasing employer contributions to the
Provident Fund by 7%. For the months of November and December 2013 and January and February 2014 no
contribution was made by the employer to the Provident Fund of the CCIs.
Wage reductions were put in force from 1/1/2014 for the CCIs and from 1/2/2014 for the Cooperative Central Bank
(decree of the Ministry of Finance issued on 29 January 2014). From the above reductions, savings of € 18,6 million
(percentage of 16.25%) were achieved. Additionally, an Early Retirement Scheme was offered to employees of the
CCIs and the CCB.
The Group , other than the mandatory contributions to Social Insurance and other government funds , based on
collective agreements the Group contributes to the following that are included in contributions to other funds.
a)Medical scheme:
Medical care is provided to employees through the Pancyprian Cooperative Health Fund, to which the Group
contributes defined contribution of 1.25% on the total emoluments of the year.
b) Life insurance:
Group life insurance is provided to employees through predefined insurance schemes of companies represented by
the Cooperative Central Bank.
c) Voluntary Retirement Plan of CS:
Under the Restructuring Plan, there was the obligation to establish the above plan and it was expected that at least
282 employees would accept the plan, which addressed those employees over the age of 45, with discretion to
accept people under this age if they wished to leave. The Plan came into force on 12/2/14 and expired on 15/4/2014.
A total of 227 people from the Credit sector and 75 from the Trading Sector (302 individuals in total) accepted the
plan.
The total cost of the plan amounted to €21,1 million.
In addition, the Group has defined contribution plans in the CCIs, the employees Provident Funds, which prepare
separate financial statements and provide their members with defined benefits upon retirement or early termination
of service pursuant to their Articles of Association.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
43
14. Employee benefits
As at 31 December 2013 some Cooperative Credit Institutions were offering defined benefit pension plans. These
benefits were terminated in early 2014. The cost from operating these plans was incurred by the affected
Cooperative Credit Institutions.
During the year an amount of €1.289 thousand (2012: € 2.275 thousand) was charged in respect of staff benefits.
The amount recognized is analyzed as follows:
2013 2012
€'000 €'000
Costs under defined benefit plans 1.159 1.369
Current service costs 130 138
Compensation due to termination of employment - 768
1.289 2.275
15. Depreciation
2013 2012
€'000 €'000
Property and equipment for own use (Note 28) 12.859 12.811
Intangible assets (Note 29) 926 1.464
13.785 14.275
16. Other operating expenses
2013 2012
€'000 €'000
Taxes and Licenses 1.093 721
Electricity 3.788 4.605
Cleaning and water supply 1.279 1.352
Insurance 2.073 1.769
Repairs and renovations 1.250 2.434
Telephone and postage 2.619 2.752
Stationery and printing 2.916 3.201
Maintenance of equipment 1.748 1.692
Audit fees 900 3.500
Other Directors remuneration 549 237
Other professional fees 2.753 4.423
Special levy on deposits 17.105 11.375
Remuneration of non-executive Committee members 662 696
Transportation costs 1.813 1.822
Advertisements 5.109 10.879
Other expenses 18.196 18.688
63.853 70.146
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
44
17. Finance costs
2013 2012
€'000 €'000
Net foreign exchange transaction losses 52 29
Interest expense 33 34
Other finance costs 167 121
252 184
18. Tax
18.1 Tax recognised in profit or loss for the year
2013 2012
€'000 €'000
Corporation tax-current year 3.207 6.395
Prior years tax 1.395 1.371
Defense contribution-current year 372 253
Capital gains tax - 10
Deferred tax - credit (Note 42) (1.775) (2.420)
Share of tax of associates (Note 31) 1 2
Charge of the year 3.200 5.611
The tax on the Group's results before tax, differs from the theoretical amount that would arise using the applicable
tax rates as follows:
2013 2012
€'000 €'000
Loss before taxation (1.694.494) (11.746)
Tax calculated at the applicable tax rates (211.812) (1.175)
Tax effect of the profit from transactions with members not subject to tax 92.723 5.456
Tax effect of expenses not deductable for tax purposes 72.314 11.617
Tax effect of allowances and income not subject to tax (7.931) (9.891)
Tax effect of losses brought forward 7 5
Tax effect of loss for the year 55.048 643
10% additional charge 7 6
Defense contribution- current year 372 253
Capital gains tax - 10
Deferred tax (1.775) (2.420)
Prior year tax 1.395 1.371
Other taxes 2.852 (264)
Tax charge 3.200 5.611
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
45
18. Tax (continued)
18.2 Tax recognized in other comprehensive income
2013 2012
€'000 €'000
Revaluation of land and building (Note 42) 356 (79)
356 (79)
The corporation tax rate is 12,5% (2012:10%). The Group is subject to tax on income arising from transactions with
non-members.
Rents received by the Group are subject to defense contribution at the rate of 3%.
19. Deposits with central bank
Deposits with the Central Bank of Cyprus include the deposits for liquidity purposes or/and additional placements
for surplus available funds and are presented below:
2013 2012
€'000 €'000
Deposits with Central Bank of Cyprus 959.250 1.167.332
959.250 1.167.332
Accrued interest 25 59
959.275 1.167.391
2013 2012
Repayment analysis: €'000 €'000
Compulsory deposits 149.250 150.332
Within three months (Note 46) 810.025 1.017.059
959.275 1.167.391
The exposure of the Group to credit risk and impairment losses in relation to the above mentioned deposits are
reported in note 50.1 of the consolidated financial statements.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
46
20. Deposits with other banking institutions
The deposits with other banking institutions comprise deposits of available funds and are presented below:
2013 2012
€'000 €'000
Deposits with cypriot banks 5.486 24.857
Depositswithn banks abroad 56.648 38.690
Other cash equivalents 1.960 37.121
64.094 100.668
Accrued interest 39 301
64.133 100.969
2013 2012
Repayment analysis: €'000 €'000
On demand (Note.46) 4.377 1.966
Within three months (Note.46) 54.462 84.494
Betwen three months and one year 5.294 14.509
64.133 100.969
On 31 December 2013 placements with other banks amounting to €18.602 thousand (2012: €18.602 thousand) were
pledged as collateral.
The exposure of the Group to credit risk and impairment losses in relation to the above mentioned deposits are
reported in note 50.1 of the consolidated financial statements.
21. Loans and other advances to customers
2013 2012
€'000 €'000
Loans 13.251.846 13.806.032
Loans to companies under liquidation 49.966 50.369
Loans for the repayment of refugee deposits 36.758 36.758
Long term advances for agricultural development 21.161 21.172
13.359.731 13.914.331
Accrued interest 4.024 6.100
13.363.755 13.920.431
Provision for impairment (2.585.615) (674.017)
10.778.140 13.246.414
2013 2012
€'000 €'000
Analysis by category:
Current accounts 1.185.521 1.322.431
Loans 12.040.744 12.455.034
Other debtors 25.581 28.567
13.251.846 13.806.032
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
47
21. Loans and other advances to customers (continued)
Provision for impairment
Total provision
Individual
provision Total
€'000 €'000 €'000
Balance -1 January 2012 1.044 415.955 416.999
From mergers - 53.077 53.077
Suspension of interest for the year - 37.450 37.450
Provision for the year (86) 203.139 203.053
Decrease in provisions of prior years - (29.090) (29.090)
Write offs - (7.472) (7.472)
At 1 January 2013 958 673.059 674.017
Suspension of interest for the year - 47.682 47.682
Provision for the year 1.760.429 108.367 1.868.796
Decrease provisions of prior years - - -
Write offs - (4.880) (4.880)
At 31 December 2013 1.761.387 824.228 2.585.615
The impairment provision of loans to companies under liquidation as calculated by the CCB amounts to €48.802
thousand (2012: € 49.202 thousand).
2013 2012
Repayment analysis: €'000 €'000
On demand 2.069.211 2.032.599
Within three months 176.860 195.220
Between three months and one year 617.876 701.808
Between one to five years 2.947.949 3.342.428
Over five years 7.551.859 7.648.376
Provisions for impairment (2.585.615) (674.017)
10.778.140 13.246.414
The non performing loans as at 31 December 2013 were €6.135.795 thousands (2012: €2.268.124 thousands)
representing 46,00% of the portfolio of loans and other advances to customers (2012: 17,00%). The comparative
figures of 2012 were estimated based on the previous directive.
The analysis of non-performing loans is disclosed in note 52, and is presented in accordance with the definition of
the new directive.
According to the new Directive, customer loans and other advances are considered non-performing when they
present past due balances or are in excess for a period of more than ninety days, they have been restructured and at
the time of restructuring were classified as non-performing or presented arrears for a period of more than 60 days
(with the exception of loans and other advances which on 15th March 2013 were performing, were restructured
between 18th March 2013 and 30th
September 2013 and the restructuring did not provide for a lump sum payment of
20% or higher of the loan or for a grace period over 12 months for interest and over 24 months for capital), they
have been restructured twice or more times in an 18 month period (with the exception of loans and other advances
fully secured with cash).
Until the 30th June 2013, under the Directive of the Central Bank of Cyprus which applied to that date, customer
loans and other advances which were not fully covered with tangible securities and presented past due balances of
more than three months were classified as non-performing.
The exposure of the Group to credit risk and impairment losses in relation to loans and other advances to customers
is reported in note 50.1 of the consolidated financial statements.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
48
21. Loans and other advances to customers (continued)
Advances with terms that were renegotiated and forbearance policy
The net advances with terms that were renegotiated are analysed below by sector:
2013 2012
€'000 €'000
Commercial sector 43.168 22.290
Construction and Real Estate entities 97.968 33.973
Manufacturing entities 23.730 9.012
Tourism entities 13.799 6.085
Other entities 56.290 23.889
Private sector 1.314.196 484.201
Total 1.549.151 579.450
2013 2012
Analysis by geographical segment: €'000 €'000
Cyprus 10.778.140 13.246.414
10.778.140 13.246.414
22. Inventories
2013 2012
€'000 €'000
Raw materials 2.401 2.192
Finished goods 7.091 7.341
Properties for development 24.360 27.146
Merchandise for resale 10.246 11.342
Currencies 6 258
Carobs 333 507
Spare parts 80 125
Tools - Packaging materials 159 167
44.676 49.078
23. Properties held for sale
2013 2012
€'000 €'000
On 1 January 59.253 52.702
Additions 17.784 6.990
Disposals (215) (496)
Transfer to investment properties 24.312 2.312
Impairment charge (17.813) (2.255)
At 31 December 83.321 59.253
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
49
23. Properties held-for-sale (continued)
Analysis of property held-for-sale 2013 2012
€'000 €'000
Land for sale 13.596 1.810
Buildings for sale 14.914 7.965
Properties acquired against debts 54.811 49.478
83.321 59.253
24. Financial assets at fair value through profit or loss
2013 2012
€'000 €'000
On 1 January 148 96
Additions 5 20
Change in fair value 49 32
At 31 December 202 148
Financial assets at fair value through profit or loss are traded securities valued at market value at closing prices on
31 December as per the official Stock Exchange bid prices. Financial assets classified at fair value through profit or
loss are expected to be realised within twelve months of the reporting date.
In the cash flow statement, financial assets at fair value through profit or loss are presented within cash flows from
operating activities as part of changes in working capital. In the consolidated statement of profit or loss and other
comprehensive income, changes in fair values of financial assets at fair value through profit or loss are recorded in
operating income.
25. Available for sale financial assets
2013 2012
€'000 €'000
On 1 January 13.034 3.008
Additions 12.665 7.904
Impairment charge (4.234) (149)
Revaluation transferred to equity 3.360 2.271
At 31 December 24.825 13.034
Available for sale financial assets, comprise principally equity securities, are revalued annually at fair value at
closing prices on 31 December. For investments traded in active markets, fair value is determined as per the Stock
Exchange bid prices. For other investments, fair value is estimated as per the current market value of similar
instruments or as per the discounted cash flows of the underlying assets. Equity investments for which fair values
cannot be measured reliably are recognised at cost less impairment.
The following are included in profit or loss with respect to available for sale financial assets:
2013 2012
€'000 €'000
Impairment charge – available for sale financial assets (4.234) (149)
Net (loss) from available for sale financial assets (4.234) (149)
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
50
26. Investments held to maturity
2013 2012
€'000 €'000
Government debt securities 982.001 1.499.135
Debt securities of Cypriot banks 888 17.974
Debt securities of foreign banks 10.865 180.455
993.754 1.697.564
Accrued Interest 23.722 36.233
1.017.476 1.733.797
The movement for the year in securities held to maturity is presented below:
2013 2012
€'000 €'000
On 1 January 1.733.797 2.148.507
Disposals (699.421) (412.710)
Impairment charge (16.900) (2.000)
At 31 December 1.017.476 1.733.797
The Republic of Cyprus which is the issuer of the Government debt securities is assessed by the Credit Rating
Agencies as Caa3/B/B. On 28 June 2013 the Cooperative Central Bank accepted the transfer of a bond with nominal
value of €667.000 thousand with a corresponding new bond, with annual interest rate of 4,50% and a maturity date
of 1st July 2019. From this transfer the Bank recognized impairment losses of €16.900 thousand. During 2012, the
results of the Group were charged with an impairment amounting to €2.000 thousand on the bonds of Cyprus
Popular Bank Public Co Ltd which are owned by the Bank. This impairment represents the 100% value of the above
bonds.
Purchase and sales of held to maturity investments are recognised on the transaction date, which is the date that the
Group commits to purchase or sell the asset. The cost of purchase includes transactions costs. The investments are
subsequently presented at amortised cost using the effective yield method.
The following are included in profit or loss with respect to held to maturity investments:
2013 2012
€'000 €'000
Impairment charge on held to maturity investments (16.900) (2.000)
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
51
27. Investment Properties
2013 2012
€'000 €'000
On 1 January 296.068 304.326
Additions 4.650 2.945
Disposals (556) -
Transfer to properties available for sale (24.312) (2.312)
Transfer from property, plant and equipment 11.874 2.816
Fair value loss (32.734) (11.707)
At 31 December 254.990 296.068
The investment properties are revalued annually on 31 December at fair value, which is the open market value as
estimated by an independent professional qualified surveyor.
28. Property, Plant and Equipment
2013 Land and
Buildings
Property
Under
Construction
Machinery
and
Equipment
Total
€'000 €'000 €'000 €'000
Cost or valuation
At 1 January 320.372 16.366 123.570 460.308
Additions 7.254 10.194 13.029 30.477
Disposals - - (13.499) (13.499)
Adjustments for revaluation (28.319) - - (28.319)
Reclassification from/to properties under
construction 3.264 (3.837) 573 -
Transfers to investment properties (12.711) (12) - (12.723)
Balance at 31 December 2013 289.860 22.711 123.673 436.244
Depreciation
At 1 January 5.391 - 96.322 101.713
Charge for the year 5.444 - 7.415 12.859
On disposals - - (11.133) (11.133)
Adjustment for revaluation (6.077) - - (6.077)
Impairment charge - - 7.867 7.867
Transfers to investment property (849) - - (849)
Balance at 31 December 2013 3.909 - 100.471 104.380
Net book value at 31 December 2013 285.951 22.711 23.202 331.864
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
28. Property, Plant and Equipment (continued)
52
2012 Land and
Buildings
Property
Under
Construction
Machinery
and
Equipment
Total
€'000 €'000 €'000 €'000
Cost or valuation
Balance - 1 January 316.137 11.745 119.146 447.028
Additions 15.477 7.041 7.029 29.547
Disposals - (127) (2.667) (2.794)
Adjustment for revaluation (10.534) - - (10.534)
Reclassification from/to properties under
construction 2.231 (2.293) 62 -
Transfers to investment properties (2.939) - - (2.939)
At 31 December 320.372 16.366 123.570 460.308
Depreciation
Balance - 1 January 2.843 - 90.424 93.267
Charge for the year 4.449 - 8.362 12.811
On disposals - - (2.638) (2.638)
Adjustment for revaluation (1.778) - - (1.778)
Impairment charge - - 174 174
Transfers to investment properties (123) - - (123)
At 31 December 5.391 - 96.322 101.713
Net book value at 31 December 2012 314.981 16.366 27.248 358.595
The Group’s land and buildings were revalued in 2013 based on valuations from independent surveyors on the basis
of open market value. The revaluation surplus net of corresponding deferred tax was charged to the fair value
reserve in equity.
In the consolidated cash flow statement the proceeds from the sale of Property, Plant and Equipment comprise of:
2013 2012
€'000 €'000
Net book value 2.366 156
Loss from the disposal of property, plant and equipment (77) (128)
Receipts from disposal of property, plant and equipment 2.289 28
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
53
29. Intangible Assets
Rights for
use
Computer
Software Total
€'000 €'000 €'000
Cost
Balance - 1 January 2012 23 18.963 18.986
Additions - 1.073 1.073
At 1 January 2013 23 20.036 20.059
Additions - 268 268
At 31 December 2013 23 20.304 20.327
Amortisation
Balance - 1 January 2012 7 16.245 16.252
Charge for the year 5 1.459 1.464
At 1 January 2013 12 17.704 17.716
Charge for the year 4 922 926
At 31 December 2013 16 18.626 18.642
Net book value at 31 December 2013 7 1.678 1.685
Net book value at 31 December 2012 11 2.332 2.343
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
54
30. Investments in associates
The financial entities and institutions with exclusive commercial activities, having assets which were consolidated
are presented below:
Name Country of
incorporation
Main Activities
Cooperative Credit Institution Troodos Ltd Cyprus Financial
Cooperative Savings Bank Pafos Ltd Cyprus Financial
Cooperative Savings Bank Limassol Ltd Cyprus Financial
Cooperative Credit Institution Strovolos Ltd Cyprus Financial
Cooperative Savings Bank Ammochostos – Larnaka Ltd Cyprus Financial
Cooperative Savings Bank Nicosia Ltd Cyprus Financial
Cooperative Savings Bank of Employees of Telecommunications, Energy
and Banks Ltd
Cyprus Financial
Cooperative Credit Institution Ledras Ltd Cyprus Financial
Cooperative Credit Institution Solidarity Ltd Cyprus Financial
Cooperative Credit Institution Lakatamia – Deftera Ltd Cyprus Financial
Cooperative Credit Institution Makrasykas – Larnakas – Eparxias
Ammochostou Ltd
Cyprus Financial
Cooperative Savings Bank Teachers of Cyprus Ltd Cyprus Financial
Cooperative Savings Police and Military officers Ltd Cyprus Financial
Cooperative Credit Institution Kokkinoxorion Ltd Cyprus Financial
Regional Cooperative Credit Institution Limassol Ltd Cyprus Financial
Regional Cooperative Credit Institution Nicosia Ltd Cyprus Financial
Cooperative Credit Institution Tamasou – Orinis and Pitsilias Ltd Cyprus Financial
Cooperative Building & Savings Bank of public officers of Cyprus Ltd Cyprus Financial
Pancyprian Cooperative Confederation Ltd Cyprus Commercial
SEM Ltd Cyprus Commercial
New SEBEGEP Ltd Cyprus Commercial
SOPAZ Ltd Cyprus Commercial
PEAL Troodos Ltd Cyprus Commercial
Newfields Ltd Cyprus Commercial
Comarine Ltd Cyprus Commercial
Cooperative Federation of Carob Supply of Limassol Ltd Cyprus Commercial
Cooperative Federation of Carob Supply of Larnaka Ltd Cyprus Commercial
Cooperative Federation of Carob Supply of Pafos Ltd Cyprus Commercial
Cooperative Federation of Carob Supply Ltd Cyprus Commercial
SYNERGKAZ Ltd Cyprus Commercial
The CCB at the end of the year was exercising substantially full control over the Cooperative Credit Institutions.
The 99% percentage resulted in 2014 after the issue of the relevant decree from the Ministry of Finance.
31. Investments in associates
2013 2012
€'000 €'000
On 1 January 213 -
Additions - 196
Write offs (12) -
Share of results of associates before tax 8 19
Share of tax of associates (1) (2)
At 31 December 208 213
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013 31. Investments in associates (continued)
55
Details of investments are as follows:
Name
Country of
incorporation
Main activities Participation
%
P&S Lpg Gas Limited Cyprus Trading gas 50
Holco Holdings Limited Malta Shipping 20
32. Other assets
2013 2012
€'000 €'000
Accrued revenues 3.005 1.657
Debtors of trading sector 10.755 18.485
Receivables for cash deficit 2.221 2.268
Receivables for inventory deficit 138 13
Prepayments 3.242 4.222
Rent debtors 1.774 1.582
Insurance claims 100 127
Refundable taxes (Note 41) 8.588 3.217
Deferred tax (Note 42) 580 763
Other receivables 16.556 17.416
46.959 49.750
The exposure of the Group to credit risk and impairment losses in relation to other assets is reported in note 50.1 of
the consolidated financial statements.
33. Amounts due to other banking institutions
2013 2012
€'000 €'000
Cheques under collection 5.740 7.598
Deposits from banks 23.779 19.406
Loans from banks 54.081 54.000
83.600 81.004
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
56
34. Deposits and other customer accounts
2013 2012
€'000 €'000
Current 925.839 839.620
Savings 1.677.169 1.542.639
Notice 1.146.161 1.433.305
Fixed 9.126.936 10.673.147
Student 50.996 53.507
Permanent 417.936 488.477
13.345.037 15.030.695
Accrued interest 132.112 169.696
13.477.149 15.200.391
2013 2012
Repayment analysis: €'000 €'000
On demand 2.719.776 2.681.603
Within three months 6.582.221 7.513.849
Between three months and one year 3.133.199 3.996.479
Between one and five years 23.639 63.155
Over five years 1.018.314 945.305
13.477.149 15.200.391
35. Repurchase agreements
2013 2012
€'000 €'000
Repurchase agreements 202.581 201.458
On 31 December 2013 the Bank has pledged in favour of the Central Bank of Cyprus deposits with the Central Bank
of Cyprus amounting to €0 (2012: €197.000 thousands) and bonds with book value of €744.807 thousands (2012:
€5.031 thousands)
36. Other loans
2013 2012
€'000 €'000
Loans for reactivation of refugees 17.682 17.682
Other loans 4.318 4.387
Other loans payable 52.206 52.206
74.206 74.275
Loans to the Group for the reactivation of refugees as well as the Groups’s loans to refugees were granted during
the period 1974-1984, from 1 January 2001 no interest is charged on these advances and they are repaid at the same
time period and amount as they are received from the debtors.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
57
37. Loan for the repayment of refugee deposits
2013 2012
€'000 €'000
The Republic of Cyprus 36.534 36.534
The loan towards the Group for the repayment of refugees’ deposits, and loans granted by the Group to the refugees
people, that are mentioned in note 21, are interest free and frozen.
38. Loan Capital
Tier 2 capital (non reversible bonds)
2013 2012
€'000 €'000
On 1 January 20.110 20.110
Repayments (2.481) (1.304)
Conversion to fixed deposits (17.660) -
(31) 18.806
Accrued interest 31 1.304
At 31 December - 20.110
(a) On 31 December 2010, the Cooperative Credit Institution of Strovolos, member of the Cooperative Sector
proceeded with the issue of non reversible bonds (straight bonds) amounting to €10.000.000. These bonds have a
maturity date on 31 December 2015 and are part of the Tier 2 capital of the Company for purposes of calculating the
capital base.
(b) On 31 October 2011, the Cooperative Credit Institution Strovolos proceeded with a second issue of non
reversible bonds amounting to € 10.000.000. These bonds, which offer 6,5% interest rate payable every 6 months,
have a maturity date on 31 October 2021, with the option of redemption from 31 of October 2016 and are part of the
Tier 2 capital of the Company for calculation purposes of the capital base.
The above bonds are direct, non guaranteed, subordinated securities of the Cooperative Credit Institution of
Strovolos and are classified at equal priority as to the claims of other security holders, which are of minor priority in
relation to the claims of depositors and other creditors of Cooperative Credit Company Strovolos. The bonds are not
listed on a Stock Exchange and no actions will take place in order to list them. Their issuance was addressed to a
limited group of individuals who were likely to be interested in contributing at least €100.000 each (minimum
issuance amount).
The bonds have a fixed interest rate of 7,0% on their nominal value for the period from their issuance date up to 31
December 2015 (first five year) and fixed interest rate of 8,0% on their nominal value for the period of 1 January
2016 to 31 December 2020. With the exception of the first period which begins on the date of the submission of the
application and the payment of the consideration and ending on 30 June 2011, every subsequent interest period will
be 6 months and the interest will be paid in cash at the end of the period ending on 30 June and 31 December.
After the decision of the General Meeting of the members of Cooperative Credit Institution of Strovolos on
19/12/2012, for the conversion of the liability of the members from unlimited to limited, effective from 1 February
2013 and according to the Cooperative Company Law, Cooperative Credit Instituion Strovolos proceeded to revoke
the bonds, giving the right to its owners to either convert it to a corresponding fixed deposit with an interest rate of
6,5% or liquidate it. As per the above, on January 2013, bonds with a value of €17.550.000 have been converted into
fixed deposits, while the remaining amount of €2.450.000 has been repaid by the Cooperative Credit Institution of
Strovolos to their owners.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
58
39. Deferred Income
2013 2012
€'000 €'000
Customer prepayments 14 10
Government Grants 55 88
Other 21 -
90 98
40. Other liabilities
2013 2012
€'000 €'000
Creditors of the trading sector 3.958 6.579
Customer prepayments 566 680
Social insurance and other taxes 1.859 1.238
Value Added Tax 1.678 1.094
Special contribution for defence - withheld 20.513 15.774
Amounts due from customers 2.450 2.716
Provision for charity purposes 505 2.263
Deferred income from government grants - 107
Provisions for other liabilities (Note 43) 2.554 6.415
Deferred tax liabilities (Note 42) 49.520 50.756
Other liabilities 43.931 44.015
127.534 131.637
Provision for charity purposes
According to article 41 paragraph 2 “Profit distribution” of the Cooperative Companies Law no. 22 of 1985, as
subsequently amended, every registered company, with limited or unlimited liability, may, after decision of the
general meeting of the members, contribute to charity or public purposes, an amount not exceeding the 7,5% of its
net profits. The movement on the provision account is as follows:
2013 2012
€'000 €'000
On 1 January 2.263 1.517
Provision for the year (1.758) 746
At 31 December 505 2.263
41. Refundable taxes
2013 2012
€'000 €'000
Corporation tax (8.608) (3.308)
Special contribution for defence 13 6
Special tax of credit institution 7 85
(8.588) (3.217)
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
59
42. Deferred tax
Deferred tax is calculated in full on all temporary differences under the liability method using the applicable tax
rates (Note 18).
Deferred tax is measured based on the tax rates that are expected to be applied on the period in which the assets will
be realized or the liability will be settled taking into account the tax rates that have been enacted or substancially
enacted until the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities on a net basis.
The movement of the deferred tax account is as follows:
Deferred tax liabilities
Accelerated tax
depreciation
Revaluation of
land and
buildings
Profit on fair
values of
investment
properties
Temporary
tax
differences Total
€'000 €'000 €'000 €'000 €'000
Balance – 1 January 2012 5.818 18.121 25.826 3.029 52.794
Debit / (Credit) to:
Statement of profit or loss and
other comprehensive income
(Note 18.1) (208) (4) (1.702) (45) (1.959)
Fair Value Reserve (Note 18.2) - (79) - - (79)
At 1 January 2013 5.610 18.038 24.124 2.984 50.756
Debit / (Credit) to:
Statement of profit or loss and
other comprehensive income
(Note 18.1) 268 (16) (1.844) - (1.592)
Fair Value Reserve (Note 18.2) - 356 - - 356
At 31 December 2013 5.878 18.378 22.280 2.984 49.520
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
60
42. Deferred tax (continued)
Deferred tax assets
Tax Losses
Temporary
tax
differences Total
€'000 €'000 €'000
Balance – 1 January 2012 989 235 1.224
Debit / (Credit) to:
Statement of profit or loss and other comprehensive income
(Note 18.1) (479) 18 (461)
At 1 January 2013 510 253 763
Debit / (Credit) to:
Statement of profit or loss and other comprehensive income
(Note 18.1) (228) 45 (183)
At 31 December 2013 282 298 580
43. Provisions for other liabilities
Provisions for
retirement
plans Guarantees Total
€'000 €'000 €'000
Balance - 1 January 2012 22.374 816 23.190
Debit / (Credit) to results - (292) (292)
Amount utilized during the year (16.483) - (16.483)
At 1 January 2013 5.891 524 6.415
Charged / (Credited) to income statement (4.077) 216 (3.861)
At 31 December 2013 1.814 740 2.554
44. Share Capital
2013 2013 2012 2012
Number of
shares €'000
Number of
shares €'000
Authorized
234.192.038 shares at €8,54 each 234.192.038 2.000.000 20.000.000 170.800
Issued and fully paid
On 1 January 11.807.464 100.836 11.458.448 97.855
Issue of shares - - 349.016 2.981
At 31 December 11.807.464 100.836 11.807.464 100.836
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
61
44. Share Capital (continued)
On 1st July 2013 there was an Extraordinary General Meeting during which it was decided to increase the authorized
capital of the Bank at two billions euro (€2.000.000.000), comprising of two hundred and thirty four millions one
hundred ninety two thousands thirty eight (234.192.038) shares with nominal value of eight euro and fifty four cents
(€8,54) each.
The total issued and fully paid share capital on 31 December 2013 was 11.807.464 shares with nominal value of
€8,54 each (2012: 11.807.464 shares).
According to the Internal Regulations of the Bank, its members may be only Cooperative Institutions, their liability
is only up to the total amount of the nominal value of the shares hold.
On 29 January 2014, a decree of the Minister of Finance was published in the Government Gazette according to
which after the recapitalization of the Cooperative Sector the participation percentage and voting rights of the
Republic of Cyprus in the ownership structure of CCB is ninety nine percent (99%) and of the existing shareholders
of CCB is one percent (1%). For this purpose, the cooperative holding company of CCB is established according to
the article 12E of the Cooperative Companies Law, where the existing shareholders of CCB are transferred with a
participation to its capital, equivalent to the participation each shareholder had in the share capital of CCB.
In addition, regardless of the provisions of the article 31A of the Cooperative Companies Law and in accordance
with the provisions of paragraph (4) of article 14 of the Law, as the above term is interpreted in the decree and in
accordance with the provisions of paragraph 14 of the decree, the nominal value of CCB’s shares amounts to one
euro and twenty eight cents (€ 1,28) per share.
The participation percentage of CCB in the ownership structure of each cooperative credit institution is 99%
regardless of the participation percentage of the Republic of Cyprus in the ownersip structure of CCB and remains
fixed, during the entire period that the Republic of Cyprus participates in the ownership structure of CCB. The
remaining 1% of the participation in the ownership structure and in the voting rights of each Cooperative Credit
Institution will belong to the existing shareholders. For this purpose, a cooperative holdings company is established
in each Cooperative Credit Institution, according to the article 12E of the Cooperative Companies Law, where all
existing shareholders of Cooperative Credit Institution are transferred, with participation to its capital, equivalent to
the participation each shareholder had in the share capital of the Cooperative Credit Institution.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
62
45. Reserves
The movement in reserves is disclosed in the consolidated statement of changes in equity.
The profit for distribution relates to the net profit for the year which is distributed according to article 41 of the
Cooperative Companies Law no. 22 of 1985, as subsequently amended.
The Statutory reserve required by law is created as per the article 41(1) of the Cooperative Companies Law no. 22
of 1985, as subsequently amended. This reserve is not available for distribution.
The fair value reserve for land and buildings arises from the revaluation of land and buildings. When revalued land
or buildings are disposed, the portion of the revaluation reserve that relates to that asset is transferred directly to
profit for distribution.
The fair value reserve for available for sale financial assets represents accumulated gains and losses arising on the
revaluation of available for sale financial assets that have been recognized in other comprehensive income, net of
amounts reclassified to profit or loss, if those assets were disposed of or impaired.
The Merger reserve is substantially created from the merger of the CCIs and the companies of the trading sector
that are under the common control, of CCB. The share capital amounts of the CCIs and the trading companies are
transferred to it along with any capital transactions within the Group.
Companies which do not distribute 70% of their profits after tax, as defined by the Special Contribution for the
Defence of the Republic Law, during the two years after the end of the year of assessment to which the profits refer,
will be deemed to have distributed this amount as dividend. Special contribution for defence at 20% for the tax
years 2012 and 2013 and 17% for 2014 and thereafter will be payable on such deemed dividend to the extent that
the owners (individuals and companies) at the end of the period of two years from the end of the year of assessment
to which the profits refer are Cyprus tax residents. The amount of this deemed dividend distribution is reduced by
any actual dividend paid out of the profits of the relevant year at any time. This special contribution for defence is
paid by the company for the account of the owners.
46. Cash and cash equivalents
For the purpose of the consolidated cash flow statement, the cash and cash equivalents include:
2013 2012
€'000 €'000
Cash 100.837 92.537
Deposits with central banks (Note 19) 810.025 1.017.059
Deposits with other banking institutions (Note 20) 58.839 86.460
969.701 1.196.056
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
63
47. Contingent liabilities and commitments
In order to address the needs of its customers, the Bank conducts business involving documentary credits and
guarantees. These facilities are not recognized in the consolidated statement of financial position and their nominal
amounts as at 31 December are shown below:
47.1. Contingent liabilities and commitments
2013 2012
€'000 €'000
Contingent liabilities
Guarantees 96.410 114.615
Commitments
Undrawn or partly utilized limits advances and loans 573.986 684.678
Documentary credits 1.868 2.570
575.854 687.248
672.264 801.863
The maturity of the contingent liabilities and commitments of the Group are as follows:
2013 2012
€'000 €'000
Within one year 207.377 252.065
Between one and five years 233.768 258.032
Over five years 231.119 291.766
672.264 801.863
Guarantees are irrevocable commitment by the Group to pay a specific amount to a third party in the event of a
customer’s default on his contractual obligations.
Undrawn or partly utilized advances and loans are commitments to provide credit facilities to customers. The credit
facilities are provided for a fixed period of time, are evaluated at regular intervals and can be cancelled by the Group
at any time.
Documentary credits are commitments by the Group to make payments to third parties provided that the terms of the
documentary credit are satisfied, which include the presentation of the bill of lading and other documents.
The Group did not recognize any liability deriving from the above guarantees and documentary credits since it is
estimated that no liability for payment will arise.
47.2. Contingent tax liabilities
Income tax returns which are submitted to tax authorities, are subject to review by the tax authorities. During future
review of the income tax returns, of the current and previous years, of the Group and its subsidiaries by the tax
authorities, there is a possibility that additional tax will be imposed in the year they are examined. The Committee
is not able to assess the amount of these contingent tax liabilities.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
47. Contingent liabilities and commitments (continued)
64
47.3. Commitments for capital expenditure
Capital expenditure contracted for at the reporting date but not yet incurred is as follows:
2013 2012
€'000 €'000
Property, plant and equipment 3.013 8.407
Investment properties 15 646
3.028 9.053
The Group provides fund management services that result in the holding or placing of assets on behalf of its
customers. The Group is not liable to its customers for any default by third parties. The assets under management
are not recognized as assets in the consolidated statement of financial position of the Group unless they are placed
with the Group. On the reporting date the total assets under management amounted to €0 million (2011: €10
million).
48. Related parties transactions
Related parties include spouses, minor children and companies in which the members of the Committee/key
management personnel hold, directly or indirectly, at least 20% of the voting rights in general meeting or they are
directors or in any way control these companies.
All transactions with members of the Committee, key management personnel, including their related parties are
made on normal business terms. In addition, a number of advances to key management personnel are provided on
the same terms as to the rest of the personnel of the Bank.
The following transactions were carried out with related parties:
48.1 Committee Members’ remuneration
The remuneration of Committee Members and other key management personnel was as follows:
2013 2012
€'000 €'000
Fees of Non-Executive Members of the Committee 143 108
Remuneration of Executive Members of the Committee 344 408
Remuneration of key management personnel 259 263
Employer contributions 130 137
876 916
The remuneration of non-executive members of the Committee, includes fees which are paid to members in order to
cover expenses for the performance of their duties.
The key management personnel comprises of members of management who are also executive members of the
Committee.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
65
48. Related parties transactions (continued)
48.2 Loans and other advances
2013 2012 2013 2012
Number €'000 €'000
Members of the Committee, key management personnel and
related parties:
Less than 1% of the net assets of the Group per member of the
Committee 7 12 893 21.298
Total 7 12 893 21.298
48.3 Deposits
2013 2012
€'000 €'000
Members of the Committee and key management personnel 1.248 2.980
Total 1.248 2.980
48.4 Contingent liabilities and commitments involving related parties
In addition, on 31 December 2013, there were contingent liabilities and commitments relating to guarantees and
lines of credit not used, as follows:
2013 2012
€'000 €'000
Members of the Committee, key management personnel and related parties 102 442
Total 102 442
49. Financial instruments by category
The accounting policies for financial instruments have been applied to the line items below:
31 December 2013
Loans and
receivables
At fair value
through profit
or loss
Available for
sale financial
assets
Held to
maturity
investments
Total
€'000 €'000 €'000 €'000 €'000
Assets as per consolidated
statement of financial position:
Cash and deposits at Central Bank
of Cyprus 1.060.112 - - - 1.060.112
Deposits with other banking
institutions 64.133 - - - 64.133
Financial assets at fair value through
profit or loss - 202 - - 202
Loans and other advances to
customers 10.778.140 - - - 10.778.140
Available for sale financial assets - - 24.825 - 24.825
Held to maturity investments - - - 1.017.476 1.017.476
Other assets 34.549 - - - 34.549
Total 11.936.934 202 24.825 1.017.476 12.979.437
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
66
49. Financial instruments by category (continued)
Loans and other
financial
liabilities Total
€'000 €'000
Liabilities as per consolidated statement of financial position:
Liabilities to other entities 83.600 83.600
Deposits and other customer accounts 13.477.149 13.477.149
Other loans 74.206 74.206
Credit facilities 36.534 36.534
Other liabilities 53.964 53.964
Total 13.725.453 13.725.453
31 December 2012
Loans and
receivables
Fair value
through profit
or loss
Available for
sale financial
assets
Held to
maturity
investments
Total
€'000 €'000 €'000 €'000 €'000
Assets as per consolidated
statement of financial position:
Cash and deposits at Central Bank
of Cyprus 1.259.928 - - - 1.259.928
Deposits with other banking
institutions 100.969 - - - 100.969
Financial assets at fair value
through profit or loss - 148 - - 148
Loans and other advances to
customers 13.246.414 - - - 13.246.414
Available for sale financial assets - - 13.034 - 13.034
Held to maturity investments - - - 1.733.797 1.733.797
Other assets 41.548 - - - 41.548
Total 14.648.859 148 13.034 1.733.797 16.395.838
Loans and other
financial
liabilities Total
€'000 €'000
Liabilities as per consolidated statement of financial position:
Liabilities to other entities 81.004 81.004
Deposits and other customer accounts 15.200.391 15.200.391
Loan capital 20.110 20.110
Other loans 74.275 74.275
Other liabilities 62.775 62.775
Repurchase agreements 201.458 201.458
Credit facilities 36.534 36.534
Total 15.676.547 15.676.547
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
67
50. Financial Risk Management
Financial risk factors
The most significant risks to which the Group is exposed to are credit risk, market risk, currency risk, interest rate
risk and liquidity risk. The Group has in place a risk management framework which gives emphasis on reliable
measurement of financial risks. These risks are monitored and managed as follows:
50.1 Credit risk
Credit risk arises from the customers’ inability to repay their loans and other advances and fulfill their contractual
obligations. The quality of the loans’ portfolio is monitored on a systematic basis and provisions for impairment are
recognized for specific or other losses that might relate to the portfolio.
The Group applies effective controls and procedures and obtains sufficient guarantees and collaterals so as to
minimize the possibility of loss from credit risk.
Credit risk concentration
There are restrictions regarding the concentration of credit risk from the Banking Law of Cyprus and the relevant
directive issued by the Central Bank of Cyprus. According to these restrictions, banks are not allowed to lend more
than 25% of their capital basis to a single customer and to associated with him parties taking into account the effect
of credit risk mitigation. The Group due to non accounting for the amount of recapitalization at 31 December 2013,
presents a deficient capital base and therefore all credit facilities granted to customers exceed the above restrictions.
Maximum exposure to credit risk ignoring collaterals
The table below reflects the worst case scenario of credit risk exposure without taking into account any collateral
held. In order to estimate the effect of the risk, as stated above, for the assets included in the consolidated statement
of financial position the accounting standards were applied, as they are presented in the consolidated statement of
financial position.
Maximum exposure to credit risk:
2013 2012
€'000 €'000
Deposits with central banks (Note 19) 959.275 1.167.391
Deposits with other banking institutions (Note 20) 64.133 100.969
Loans and other advances to customers (Note 21) 13.363.755 13.920.431
Held to maturity investments (Note 26) 1.017.476 1.733.797
Other receivables (Note 49) 34.549 41.548
Total 15.439.188 16.964.136
Contingent liabilities (Note 47) 96.410 114.615
Commitments (Note 47) 575.854 687.248
Total not included on the consolidated statement of financial position 672.264 801.863
Total credit risk exposure 16.111.452 17.765.999
As shown above, 82.9% of the total credit risk exposure arises from loans and other advances to customers, 6.3%
from held to maturity investments and 6.0% from deposits with Central Banks.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
68
50. Financial Risk Management (continued)
50.1 Credit Risk (continued)
Impaired advances
If the Group does not assess the recovery of the total amount of the capital and interest due according to the
contractual terms of the loan or the relevant agreement, it classifies these advances as impaired and classifies them
in Grade 3 (high risk).
Non impaired advances
The Group’s loans which were assessed individually and no impairment was identified are classified in risk tiers in
the way below:
Grade 1 (Low Risk):
Loans which were past due up to 90 days and are performing.
Grade 2 (Medium Risk):
Loans past due between 91 and 180 days.
Grade3 (High Risk):
Loans past due over than 180 days.
Advances which are past due but not impairment
Includes loans for which, even if the repayment of interest and amount due is past due according to the contractual
obligations, the Group after evaluation does not assess that they should be impaired, because of the amount of
collateral or/and the level of repayment of amounts due.
Advances with conditions that were renegotiated
The Group, where it deems as beneficial, renegotiates the terms of advances for cases in which customers request
so, as they are not in the position to repay according to the initial terms, either because of their adverse financial
position or any other reason.
During the year the Group proceeded with the renegotiation of the repayment terms of advances of €1.549.151
(2012: €1.047.771),that relate to housing loans to private individuals and corporate loans to medium-sized
businesses. There was no modification to the collateral of the loans since they are fully covered either with
collaterals or government guarantees.
Under the new Directive, restructuring of a client’s facilities covers any action that changes the terms and/or
conditions of the client’s facilities in order to deal with existing or expected difficulties of the client to service the
facilities in accordance with the existing repayment schedule.
According to the said Directive, a restructured non-performing facility remains classified as non-performing for six
months following the commencement of the new amortization repayment schedule of capital installments in relation
to credit facilities with modifications in their amortization repayment schedule, while for credit facilities with
gradual increase of the installment amount, the facility remains non-performing for six months following the first
month at which the highest installment is due. Exceptions to the above rules are cases where the modified
repayment schedule provides for a lump sum payment on maturity of 20% or higher of the outstanding balance (as
at the date of restructuring). For these cases, the facility remains non-performing until its maturity.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
69
50. Financial Risk Management (continued)
50.1 Credit Risk (continued)
Advances which are past due but not impairment (continued)
A restructured non-performing facility also remains classified as non-performing for six months following the
restructuring in relation to overdrafts. After the six months, overdraft accounts will be classified as performing only
if their credit turnover (excluding credits relating to cheques returned unpaid and credits relating to disbursement of
loans) is equal to or higher than the interest charged for the above-mentioned period.
After the lapse of the above mentioned period for the classification of restructured facilities as nonperforming, the
facility will be classified as non-performing only if it fulfills the criteria for the classification of non-performing
facilities according to the said Directive.
Collateral
On the basis of the Group’s policy, the amount of credit facilities granted should be based on the repayment
capacity of the relevant counterparties. Furthermore, for the hedging and mitigation of credit risk the Group obtains
collaterals the nature of which is set by the Group’s policies.
The main collateral held by the Group includes mortgage interests over properties, pledging of cash, government
and bank guarantees, charges over business assets as well as personal and corporate guarantees.
The total ratio of loan coverage per type of exposure as at the 31.12.2013 (coveredwith real estate, financial
securities and government guarantees)
Collateral value/loan balance:
Coverage percentage/
exposure type
Housing Loans Consumer Loans
(incl. Current
account)
Medium-sized
Businesses
Municipalities and
Local Authorities
€'000 €'000 €'000 €'000
<20% 352.953 1.243.848 441.095 84.576
(20%-40%) 42.392 70.782 43.997 2.362
(40%-60%) 104.155 143.224 97.550 23.469
(60%-80%) 248.414 286.549 196.211 6.088
(80%-100%) 524.721 650.751 365.823 97.627
(100%-120%) 1.538.375 1.307.033 696.744 454.056
(120%-140%) 813.621 565.850 321.367 7.806
>=140% 1.051.147 697.859 395.628 487.682
Total 4.675.778 4.965.896 2.558.415 1.163.666
% Fully Secured 73% 52% 55% 82%
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
70
50. Financial Risk Management (continued)
50.1 Credit Risk (continued)
Ratio of Loans to Value (loan balance/market value of collateral loan/market price):
Ratio of loans to value (loan
balance/market value of collateral):
Ratio of loans to value (loan
balance/market value of collateral):
Percentage of the total loans with
property collaterals
€'000 %
<20% 1.052.076 7,87%
(20% - 40%) 1.885.245 14,11%
(40% - 60%) 2.071.816 15,50%
(60% -80%) 1.809.583 13,54%
(80%-100%) 889.500 6,66%
>= 100% 1.014.131 7,59%
Total 8.722.351 65,27%
The loan balance in relation to the total amount of advances to customers relates to those that did not have
immovable property as collateral.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
71
50. Financial Risk Management (continued)
50.1 Credit Risk (continued)
31 December 2013 Loans and other
advances to
customers
Deposits with
other banking
institutions
Investments
held to maturity Total
€'000 €'000 €'000 €'000
Carrying amount 10.778.140 64.133 1.017.476 11.859.749
Individually impaired:
Grade 1 (low risk) 840.859 - - 840.859
Grade 2 (moderate risk) 714.557 - - 714.557
Grader 3 (high risk) 3.898.431 - - 3.898.431
Provisions for impairment (824.228) - - (824.228)
Carrying amount 4.629.619 - - 4.629.619
Advances with conditions that were
renegotiated 750.322 - - 750.322
Past due but not impaired:
Grade 1 (low risk) 640.882 - - 640.882
Grade 2 (moderate risk) 261.362 - - 261.362
Grade 3 (high risk) 975.899 - - 975.899
Carrying amount 1.878.143 - - 1.878.143
Analysis of past due:
0-30 days 385.695 - - 385.695
30-60 days 203.949 - - 203.949
60-90 days 134.892 - - 134.892
90 days+ 1.153.607 - - 1.153.607
Carrying amount 1.878.143 - - 1.878.143
Advances with conditions that were
renegotiated 169.717 - - 169.717
Neither past due nor impaired:
Grade 1 (low risk) 5.718.629 64.133 1.017.476 6.800.238
Grade 2 (moderate risk) 313.136 - - 313.136
Carrying amount 6.031.765 64.133 1.017.476 7.113.374
Advances with conditions that were
renegotiated 629.112 - - 629.112
Balances after individual impairment 12.539.527 64.133 1.017.476 13.621.136
Collective impairment (1.761.387) - - (1.761.387)
Total carrying amount 10.778.140 64.133 1.017.476 11.859.749
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
72
50. Financial Risk Management (continued)
50.1 Credit Risk (continued)
31 December 2012 Loans and other
advances to
customers
Deposits with
other banking
institutions
Investments
held to maturity Total
€'000 €'000 €'000 €'000
Carrying amount 13.246.414 100.969 1.733.797 15.081.180
Individually impaired:
Grade 1 (low risk) 6.171 - - 6.171
Grade 2 (moderate risk) 110.525 - - 110.525
Grade 3 (high risk) 1.113.070 - - 1.113.070
Provisions for impairment (673.059) - - (673.059)
Carrying amount 556.707 - - 556.707
Advances with conditions that were
renegotiated 4.510 - - 4.510
Past due but not impaired:
Grade 1 (low risk) 510.174 - - 510.174
Grade 2 (moderate risk) 371.450 - - 371.450
Grade 3 (high risk) 1.249.407 - - 1.249.407
Carrying amount 2.131.031 - - 2.131.031
Analysis of past due
0-30 days 524.529 - - 524.529
30-60 days 118.720 - - 118.720
60-90 days 91.481 - - 91.481
90 days+ 1.396.301 - - 1.396.301
Carrying amount 2.131.031 - - 2.131.031
Advances with conditions that were
renegotiated 46.165 - - 46.165
Neither past due nor impaired:
Grade 1 (low risk) 8.779.337 100.969 1.733.797 10.614.103
Grade 2 (moderate risk) 1.779.484 - - 1.779.484
Carrying amount 813 - - 813
10.559.634 100.969 1.733.797 12.394.400
Advances with conditions that were
renegotiated
528.775 - - 528.775
Balances after individual impairment
Collective impairment 13.247.372 100.969 1.733.797 15.082.138
Total carrying amount (958) - - (958)
Past due but not impaired: 13.246.414 100.969 1.733.797 15.081.180
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
73
50. Financial Risk Management (continued)
50.2 Market risk
Market risk is the risk of financial loss arising from sudden changes in foreign currency prices, interest rates and
prices of equity securities and other securities. The risk is managed by the Assets and Liabilities Committee
(ALCO) so as to be maintained within acceptable limits.
For the efficient management of the risk from interest rate and exchange rate movements, the Assets and Liabilities
Committee has defined specific strategies and set limits on open positions for every risk.
Analysis relating to the position of the Group regarding foreign currency risk, interest rate risk and price risk is
shown below:
50.2.1 Currency risk
Currency risk is the risk of financial loss arising from sudden changes in foreign currency prices when there is a net
position (asset or liability) in one or more foreign currencies. The Management of the Bank sets open foreign
currency position limits, overnight and intra-day, on a total basis and for each currency separately which are
monitored on a continuous basis.
The tables below set out the Bank’s exposure to currency risk resulting from its existing open foreign currency
positions. Changes in exchange rates against the Euro used in the sensitivity analysis are based on historical
fluctuations in foreign exchange prices.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
74
50. Financial Risk Management (continued)
50.2 Market risk (continued)
50.2.1 Currency risk (continued)
31 December 2013 Euro
United States
Dollars
British
pounds
Other
currencies Total
€'000 €'000 €'000 €'000 €'000
Assets
Cash 86.292 7.097 5.726 1.722 100.837
Deposits with central banks 959.275 - - - 959.275
Deposits with other banking
institutions 40.343 10.391 11.294 2.105 64.133
Loans and other advances to
customers 10.778.140 - - - 10.778.140
Inventories 44.676 - - - 44.676
Properties held for sale 83.321 - - - 83.321
Financial assets at fair value through
profit or loss 202 - - - 202
Available for sale financial assets 24.825 - - - 24.825
Investments held to maturity 1.017.476 - - - 1.017.476
Investment properties 254.990 - - - 254.990
Property, plant and equipment 331.864 - - - 331.864
Intangible assets 1.685 - - - 1.685
Other assets 47.167 - - - 47.167
Total 13.670.256 17.488 17.020 3.827 13.708.591
Liabilities
Amounts due to other bank
institutions 83.600 - - - 83.600
Deposits and other customer
accounts 13.417.755 25.890 27.403 6.101 13.477.149
Repurchase agreements 202.581 - - - 202.581
Other loans 74.206 - - - 74.206
Loan for the repayment of refugee
deposits 36.534 - - - 36.534
Other liabilities 127.624 - - - 127.624
Total 13.942.300 25.890 27.403 6.101 14.001.694
Equity (293.103) - - - (293.103)
Total liabilities and equity 13.649.197 25.890 27.403 6.101 13.708.591
Net currency position 21.059 (8.402) (10.383) (2.274) -
Sensitivity analysis
Change in exchange rate +% 5,0% 4,0% 6,0%
Impact on net profit € (420) (415) (136)
Impact on equity € (420) (415) (136)
Change in exchange rate -% 5,0% 4,0% 6,0%
Impact on net profit € 420 415 136
Impact on equity € 420 415 136
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
75
50. Financial Risk Management (continued)
50.2 Market risk (continued)
50.2.1 Currency risk (continued)
31 December 2012
Euro
United States
Dollars
British
Pounds
Other
currencies Total
€'000 €'000 €'000 €'000 €'000
Assets
Cash 75.983 7.593 6.607 2.354 92.537
Deposits with central banks 1.167.391 - - - 1.167.391
Deposits with other banking
institutions 73.012 14.109 11.283 2.565 100.969
Loans and other advances to
customers 13.246.414 - - - 13.246.414
Inventories 49.078 - - - 49.078
Properties held for sale 59.253 - - - 59.253
Financial assets at fair value through
profit or loss 148 - - - 148
Available for sale financial assets 13.034 - - - 13.034
Investments held to maturity 1.733.797 - - - 1.733.797
Investment properties 296.068 - - - 296.068
Property, plant and equipment 358.595 - - - 358.595
Intangible assets 2.343 - - - 2.343
Other assets 49.963 - - - 49.963
Total 17.125.079 21.702 17.890 4.919 17.169.590
Liabilities
Amounts due to other bank
institutions 81.004 - - - 81.004
Deposits and other customer accounts 15.131.162 33.281 26.981 8.967 15.200.391
Repurchase agreements 201.458 - - - 201.458
Other loans 74.275 - - - 74.275
Loan for the repayment of refugee
deposits 36.534 - - - 36.534
Loan capital 20.110 - - - 20.110
Other liabilities 131.735 - - - 131.735
Total 15.676.278 33.281 26.981 8.967 15.745.507
Equity 1.424.083 - - - 1.424.083
Total liabilities and equity 17.100.361 33.281 26.981 8.967 17.169.590
Net currency position 24.718 (11.579) (9.091) (4.048) -
Sensitivity analysis
Change in exchange rate +% 5,0% 4,0% 6,0%
Impact on net profit € (579) (364) (243)
Impact on equity € (579) (364) (243)
Change in exchange rate -% 5,0% 4,0% 6,0%
Impact on net profit € 579 364 243
Impact on equity € 579 364 243
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
76
50. Financial risk management (continued)
50.2 Market risk (continued)
50.2.2 Interest rate risk
Interest rate risk is the risk of decrease in the value of financial instruments or in net interest income as a result of
adverse movements in the market interest rates due to timing differences on the repricing of assets and liabilities.
The Group closely monitors interest rate movements and the repricing maturity structure of its assets and liabilities
and is taking all necessary measures for managing interest rate risk.
The tables below set out the Group’s exposure to interest rate risk. The Group’s assets and liabilities are presented in
the tables at carrying amounts based on the contractual repricing date for floating rate items or the maturity date for
fixed rate items.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
77
50. Financial risk management (continued)
50.2 Market risk (continued)
50.2.2 Interest rate risk (continued)
31 December 2013
On demand
Within
three
months
Between
three
months and
one year
Between
one and
five years
Over five
years
Non-interest
bearing Total
€'000 €'000 €'000 €'000 €'000 €'000 €'000
Assets
Cash - - - - - 100.837 100.837
Deposits with central banks - 810.006 - 149.269 - - 959.275
Deposits with other banking
institutions 4.377 54.462 5.294 - - - 64.133
Loans and other advances to
clients (gross) 2.069.211 176.860 617.876 2.947.949 7.551.859 - 13.363.755
Inventories - - - - - 44.676 44.676
Properties held for sale - - - - - 83.321 83.321
Financial assets at fair value
through profit or loss - - - - - 202 202
Available for sale financial
assets - - - - - 24.825 24.825
Investments held to maturity - - - - 1.017.476 - 1.017.476
Investment properties - - - - - 254.990 254.990
Property, Plant and
Equipment - - - - - 331.864 331.864
Intangible assets - - - - - 1.685 1.685
Other assets - - - - - 47.167 47.167
Total 2.073.588 1.041.328 623.170 3.097.218 8.569.335 889.567 16.294.206
Liabilities
Amounts due to other bank
institutions - 77.860 - - - 5.740 83.600
Deposits and other customer
account 2.719.776 6.582.221 3.133.199 23.639 1.018.314 - 13.477.149
Repurchase agreements - - - - 202.581 - 202.581
Other loans 243 11.784 41.291 - 20.888 - 74.206
Loan for the repayment of
refugee deposits - - - - 36.534 - 36.534
Other liabilities - - - - - 127.624 127.624
Total 2.720.019 6.671.865 3.174.490 23.639 1.278.317 133.364 14.001.694
Net position (646.431) (5.630.537) (2.551.320) 3.073.579 7.291.018 756.203 2.292.512
Net cumulative position (646.431) (6.276.968) (8.828.288) (5.754.709) 1.536.309 2.292.512
Loans and other advances to customers do not include the accumulated impairment provisions of €2.585.615
thousands.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
78
50. Financial risk management (continued)
50.2 Market risk (continued)
50.2.2 Interest rate risk (continued)
31 December 2012
On demand
Within
three
months
Between
three
months and
one year
Between
one and
five years
Over five
years
Non-interest
bearing Total
€'000 €'000 €'000 €'000 €'000 €'000 €'000
Assets
Cash - - - - - 92.537 92.537
Deposits with central banks 150.332 1.017.059 - - - - 1.167.391
Deposits with other banking
institutions 1.966 84.494 14.509 - - - 100.969
Loans and other advances to
clients (gross) 2.032.599 195.220 701.808 3.342.428 7.648.376 - 13.920.431
Inventories - - - - - 49.078 49.078
Properties held for sale - - - - - 59.253 59.253
Financial assets at fair value
through profit or loss - - - - - 148 148
Available for sale financial
assets - - - - - 13.034 13.034
Investments held to maturity - - - - 1.733.797 - 1.733.797
Investment properties - - - - - 296.068 296.068
Property, Plant and
Equipment - - - - - 358.595 358.595
Intangible assets - - - - - 2.343 2.343
Other assets - - - - - 49.963 49.963
Total 2.184.897 1.296.773 716.317 3.342.428 9.382.173 921.019 17.843.607
Liabilities
Amounts due to other
institutions - 73.406 - - - 7.598 81.004
Deposits and other customer
accounts 2.681.603 7.513.849 3.996.479 63.155 945.305 - 15.200.391
Repurchase agreements - - - - 201.458 - 201.458
Other loans 149 11.760 41.307 - 21.059 - 74.275
Loan for the repayment of
refugee deposits - - - - 36.534 - 36.534
Loan capital - - - - 20.110 - 20.110
Other liabilities - - - - - 131.735 131.735
Total 2.681.752 7.599.015 4.037.786 63.155 1.224.466 139.333 15.745.507
Net position (496.855) (6.302.242) (3.321.469) 3.279.273 8.157.707 781.686 2.098.100
Net cumulative position (496.855) (6.799.097) (10.120.566) (6.841.293) 1.316.414 2.098.100
The Loans and other advances to customers do not include the accumulated impairment provisions of €674.017
thousand.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
79
50. Financial risk management (continued)
50.2 Market risk (continued)
50.2.2 Interest rate risk (continued)
Sensitivity analysis
An increase of 100 basis points in interest rates on 31 December 2013 would have increased equity and profit or loss
by the amounts shown below. For a decrease of 100 basis points there would be an equal and opposite impact on the
profit and other equity. This analysis assumes that all other variables, in particular foreign currency rates, remain
constant.
Equity Profit or loss
2013 2012 2013 2012
€'000 €'000 €'000 €'000
Impact 15.363 13.164 15.363 13.164
50.2.3 Investment price risk
The risk comes from adverse changes in current prices of the investments in shares held by the Group.
The Group invests mainly in the Cyprus Stock Exchange (C.S.E.) and classifies these investments as financial assets
available for sale, where the changes in the prices of these investments are recorded in equity.
50.3 Liquidity Risk
Liquidity risk is the risk of financial loss arising from potential inability of the Group to currently meet its current
payment obligations.
The Group monitors liquidity on a daily basis and is taking all necessary measures to manage this risk..
The following tables show the contractual undiscounted cash flows of financial liabilities based on the remaining
contractual period from the reporting date to their maturity.
31 December 2013
Carrying
amount
Contractual
cash flows
On
demand
Within
three
months
Between
three
months
and one
year
Between
one and
five years
Over five
years
€'000 €'000 €'000 €'000 €'000 €'000 €'000
Liabilities
Deposits and other customer
account 13.477.149 13.662.885 2.989.828 7.002.302 3.080.632 233.888 356.235
Amounts due to other bank
institutions 83.600 93.292 26.359 10.502 12.866 20.557 23.008
Repurchase agreements 202.581 203.087 - 203.087 - - -
Other liabilities 238.364 239.410 49.296 77.585 14.264 200 98.065
Total liabilities 14.001.694 14.198.674 3.065.483 7.293.476 3.107.762 254.645 477.308
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
80
50. Financial risk management (continued)
50.3 Liquidity Risk (continued)
31 December 2012
Carrying
amount
Contractual
cash flows
On
demand
Within
three
months
Between
three
months
and one
year
Between
one and
five years
Over five
years
€'000 €'000 €'000 €'000 €'000 €'000 €'000
Liabilities
Deposits and other customer
accounts 15.200.391 15.530.993 2.736.212 7.830.559 4.399.032 81.081 484.109
Amounts due to other bank
institutions 81.004 93.879 22.132 30.427 7.304 11.384 22.632
Repurchase agreements 201.458 204.500 - 204.500 - - -
Other liabilities 262.654 279.554 75.086 76.238 21.735 5.655 100.840
Total liabilities 15.745.507 16.108.926 2.833.430 8.141.724 4.428.071 98.120 607.581
50.4 Other risks
50.4.1 Capital risk management
The primary regulatory authority, which determines and monitors the Group’s capital requirements is the Central
Bank of Cyprus ( CBC). CBC is guided in its regulatory role by the recommendations of the Basel Committee and
the European Union instructions for banking matters.
In 2007, CBC published the ‘Unofficial consolidation of the directive for the calculation of capital adequacy and
large exposures of banks of 2006 and 2007’’with the last amendment taking place on July 2011, for the purpose of
harmonization with the European Union Directives on the Calculation of Capital Requirements and Large
Exposures (Basel II).
The Basel II directive consists of the following pillars:
Pillar I – Minimum Capital Requirements
Pillar I refers to the minimum capital requirements of the credit institution, so as the exposure of the Group to credit
risk, market risk and operational risk is adequately covered.
Pillar II – The supervisory review process
Pillar II links the regulatory capital requirements to the banking institutions’ internal capital adequacy assessment
procedures (ICAAP) and to the reliability of its internal control structures. The purpose of Pillar II is to promote the
communication between supervisors and banks on a continuous basis and to evaluate how well the banks are
assessing their capital needs in relation to their risks.
Pillar ΙΙΙ – Market discipline
Pillar III requires the disclosure of information regarding the risk management policies of the banking institution,
the results of the calculations of minimum capital requirements, as well as the results of the ICAAP together with
reports regarding credit risk.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
50. Financial risk management (continued)
50.4 Other risks (continued)
50.4.1 Capital risk management (continued)
81
In the context of legislative and regulatory demands for the connection of the Cooperative Credit Institutions (CCI)
into a central organization as per the instructions of the European Union, the Cooperative Central Bank Limited
assumed the role of central organization, defined as ‘Central Body’. The Central Body started to operate on 1
January 2008. The Bank, by assuming its new role of the Central Body in compliance with the European Directive
2000/12/EC (recast Directive 2006/48/EC) relating to the taking up and pursuit of business of credit institutions and
the Cooperative Societies Rules of 2004, guaranteed the commitments of affiliated CCIs so that the latter be
exempted from the regulatory provisions of the Directive on an individual basis. The above Directive and the Rules
provide that, the exempted provisions must be satisfied by the Central Body and the affiliated CCIs on a
consolidated basis.
The calculation of the capital adequacy of the Central Body is performed on the basis of the methodology agreed
with the Central Bank of Cyprus and relative disclosures, regarding the policies of risk management and results of
calculating capital adequacy, are published online in the webpage of the Cooperate Central Bank Ltd,
www.coopbank.com.cy.
The Group’s equity comprises of the two following tiers:
- Tier 1 capital: includes capital and reserves (including revaluation reserves)
- Tier 2 capital: including revaluation reserves
The capital adequacy of the Group, on an individual basis is monitored by the management every quarter. The
required reports are submitted every quarter to the CBC, for calculating the capital requirements and Large
Exposures on a collective basis.
On 16.12.2013, the CBC, with a letter modified the Directive on the Calculation of Capital Requirements and Large
Exposures (cancelation of amendment no. 2 of 2011), setting the minimum core tier 1 ratio at 9% as provided by the
Memorandum of Understanding with Troika. In 2014 and particular on 29.5.2014 the CBC with a new letter re-
defined the minimum core tier 1 ratio at 8%, a percentage which is in line with the harmonized ratio which will be
applied in the base scenario of the evaluation of the European Central Bank.
As at 31 of December 2013, core tier 1 ratio for the Central Body was calculated as 12,1% after the recapitalization
through state aid and after the final total provisions of approximately €2,58 billion. In the calculation of the ratio
the revaluation reserves have been included. If the revaluation reserves are not included, the ratio is calculated at
10.6%.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
50. Financial risk management (continued)
50.4 Other risks (continued)
50.4.1 Capital risk management (continued)
82
For the years 2013 and 2012, the Group complied with all capital requirements, as presented below:
2013 2012
€'000 €'000
Own Funds
Core Tier 1 capital 1.011.556 1.035.236
Total risk weighted assets 8.738.803 9.610.563
% %
Core Tier 1 ratio 12,10 10,80
Tier 1 ratio 9,00 8,3
50.4.2 Counterparty risk
Counterparty Risk arises from the risk of loss of funds due to the probability that a counterparty with which the
Group enters into a specific transaction, defaults before the final settlement of the transaction.
The Assets and Liabilities Committee of the Bank (ALCO) approved a specific model for the determination of
limits regarding the exposures in countries and banking institutions of Cyprus and abroad. The limits are mainly
determined based on the credit rating of the counterparty, as it is set by recognised international rating agencies and
based on the maturity period of the placement/investment. The model is revised at least annually or whenever the
economic conditions require.
The credit ability of the counterparties that are not assessed by recognised international rating agencies, is assessed
by the credit risk department of the Group based on internally developed methodology, which takes into account
quantitative and qualitative criteria. The credit risk department of the Group, monitors on a regular basis, any
changes of the counterparties’ credit ratings and of the countries with which the Group has set limits and distributes
timely the relevant information to the relevant departments for taking the necessary measures and corrective actions.
In addition a daily monitoring system has been set regarding the use and the conformity with the limits determined,
so as to identify actual and avoid possible breaches of the limits.
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
83
51. Fair value of financial instruments
Fair value represents the amount which an asset can be exchanged for or a liability settled at an arm’s length
transaction.
The majority of assets and liabilities are presented in their estimated fair value.
Fair value of loans and other advances is approximately equal to their book value in the consolidated statement of
financial position, net of the provisions for impairment.
Fair value of the remaining financial assets on the consolidated statement of financial position does not differ
significantly from their book value.
Fair value of the financial instruments traded in active markets such as the trading and available for sale
investments which are listed in stock exchange, is based on stock prices at the reporting date. The stock price used
for the financial assets held by the Group is the bid price. The appropriate stock price for financial liabilities is the
current ask price.
Measurements of fair value recognized in the consolidated financial position.
The table below analyses the financial measures carried at fair value, by valuation method. The different levels have
been defined as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
31 December 2013 Level 1 Level 2 Level 3 Total
€'000 €'000 €'000 €'000
Financial assets
Fair value through profit or loss
Investment in shares 202 - - 202
Financial assets available for sale
Investment in debt securities - 10.252 - 10.252
Investment in shares 14.573 - - 14.573
Total 14.775 10.252 - 25.027
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
51. Fair financial value of financial instruments (continued)
Fair value measurement recognized in the consolidated statement of financial position (continued)
84
31 December 2012 Level 1 Level 2 Level 3 Total
€'000 €'000 €'000 €'000
Financial assets
Fair value through profit or loss
Investment in debt securities 148 - - 148
Financial assets available for sale
Investment in shares 13.034 - - 13.034
Total 13.182 - - 13.182
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
85
52. Analysis of performing and non-performing loans
31 December 2013 Performing credit facilities
Total credit
facilities
Credit facilities
that were not
restructured
Credit
facilities that
were
restructured
Total
performing
credit facilities
Non-
performing
credit facilities
€'000 €'000 €'000 €'000 €'000
Credit facilities to legal entities
Commercial sector 313.528 199.331 5.720 205.051 108.477
Construction and Real Estate
businesses 217.194 53.584 19.437 73.021 144.173
Manufacturing businesses 98.774 16.330 2.065 18.395 80.379
Tourism businesses 81.162 42.972 5.254 48.226 32.936
Other businesses 761.833 646.839 2.298 649.137 112.696
Services 235.514 182.079 7.913 189.992 45.522
Credit facilities to legal entities in
retail
Commercial sector 246.336 113.083 19.273 132.356 113.980
Construction and Real Estate
businesses 435.080 135.302 44.899 180.201 254.879
Manufacturing businesses 139.237 60.055 9.092 69.147 70.090
Tourism businesses 61.140 20.808 5.564 26.372 34.768
Other businesses 165.197 83.807 8.060 91.867 73.330
Services 161.354 61.090 13.150 74.240 87.114
Credit facilities to legal entities
Credit facilities for the acquisition/
construction of property:
(α) Owner occupancy 4.622.457 2.469.490 431.079 2.900.569 1.721.888
(β) For other reasons 556.955 179.494 58.107 237.601 319.354
Consumer loans 4.272.406 1.512.308 366.873 1.879.181 2.393.225
Credit cards 30.126 21.392 - 21.392 8.734
Current accounts 559.912 292.932 2.586 295.518 264.394
Credit facilities to self-employed 405.550 113.527 22.167 135.694 269.856
Total facilities 13.363.755 6.204.423 1.023.537 7.227.960 6.135.795
Provision for impairment 2.585.615 437.108 159.740 596.848 1.988.767
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
86
53. Loan portfolio analysis as at 31 December 2013 based on the date the loans were issued
Date of issue Total loan portfolio Advances to legal entities Advances to individuals for acquisiton/
construction of property
Advances to individuals- Other Advances
Total
advances
Non-
performing
advances
Provisions Total
advances
Non-
performing
advances
Provisions Total
advances
Non-
performing
advances
Provisions Total
advances
Non-
performing
advances
Provisions
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Within 1 year 1.519.833 640.103 473.818 358.449 178.262 129.269 310.539 72.298 59.060 850.845 389.543 285.489
1 - 2 years 2.993.024 1.007.517 348.508 530.913 178.386 38.801 1.180.860 310.382 111.493 1.281.251 518.749 198.214
2 - 3 years 3.116.916 1.536.541 522.878 438.897 232.778 56.261 1.388.794 546.676 171.871 1.289.225 757.087 294.746
3 - 5 years 3.491.847 1.591.982 556.740 1.124.177 270.389 59.609 1.283.840 608.612 213.461 1.083.830 712.981 283.670
5 - 7 years 1.081.984 640.397 269.268 179.194 110.250 34.824 516.911 252.609 89.500 385.879 277.538 144.944
7 - 10 years 641.676 334.725 188.803 129.534 69.970 33.470 267.505 105.204 54.190 244.637 159.551 101.143
Over 10 years 518.475 364.391 225.600 153.408 102.722 38.297 161.009 106.896 66.876 204.058 154.773 120.427
Private Individuals – Housing loans include facilities provided for the acquisition or construction of property for owner occupancy or other reasons
Private Individuals – Other loans include all facilities provided to private individuals
COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
87
54. Events after the reporting period
The major events relate to the approval of the restructuring plan of the Cooperative Sector, the agreement amongst
the Ministry of Finance, the Cooperative Central Bank and the European Stability Mechanism for the transfer of
€1,5 billions for the recapitalization of the Cooperative Sector and the transfer of its shares to the State, the
completion of the mergers of the cooperative institutions, the voluntary retirement plan for the Group’s employees
and the assessment of the quality of the assets of the financial institutions and the undertaking of the supervision by
the European Central Bank.
For the recapitalization of the Cooperative Credit Sector, on the 10 of March 2014 the Bank issued 1.171.875.000
shares, of total value €1.500.000 thousands to the Republic of Cyprus.