COOPERATIVE CENTRAL BANK LTD · CCB is the main shareholder of the 18 Cooperative Credit Institutions (“CCIs”) while exercising control over companies with trading activities

COOPERATIVE CENTRAL BANK

LTD

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2014

COOPERATIVE CENTRAL BANK LTD

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS


CONTENTS PAGE

Officers and professional advisors 1

Report of the Committee 2 – 4

Corporate Governance 5 – 10

Independent Auditors' report 11 – 13

Consolidated statement of profit or loss and other comprehensive income 14 – 15

Consolidated statement of financial position 16

Consolidated statement of changes in equity 17– 18

Consolidated statement of cash flows 19 – 20

Notes to the consolidated financial statements 21 – 105


1

OFFICERS AND PROFESSIONAL ADVISORS

Committee: Nicolas Hadjiyiannis - Independent Non-Executive Chairman

Charalambos Christodoulides - Independent Non-Executive Vice Chairman

Demetris Theodotou - Non-Executive Member

George Hadjinicola - Non-Executive Member

Athanasios Stavrou - Independent Non-Executive Member

Georgios Kittos - Independent Non-Executive Member

Panicos Pouros - Independent Non-Executive Member

George Strovolides - Independent Non-Executive Member

Lambros Pieri - Independent Non-Executive Member

Marios Klerides - Executive Member

Efthymios Pantazis - Executive Member (resigned on 7 November 2014)

Panayiotis Philippou - Executive Member (appointed on 19 January 2015 and resigned on 30 March

2015)

General Manager: Marios Klerides

Senior Management: Achilleas Yiallouros - Senior Manager, Banking Operations Division

Stavros Iacovou - Senior Manager, Operations and Administrative Services Division

Lambros Papalambrianou - Chief Financial Officer

Varnavas Kourounas - Chief Shared Services Division (SSD) Officer

Andreas Trokkos - Chief Restructuring Officer

Efthymios Pantazis - Chief Risk Officer

Marios Demosthenous - Chief Audit Executive

Marios Xenides - Chief Compliance Officer

Independent Auditors: KPMG Limited

Certified Public Accountants and Registered Auditors

14 Esperidon Street

1087 Nicosia

Cyprus

Legal Advisors: Tassos Papadopoulos & Associates

Christos M. Triantafillides

George Z. Georgiou & Associates

Registered office: 8 Gregori Afxentiou Street, 1096 Nicosia, P.O. 24537, 1389 Λευκωσία

2

REPORT OF THE COMMITTEE

The Committee of Cooperative Central Bank Ltd (the “Bank” or “'CCB”), presents to the members for approval its

Annual Report together with the audited consolidated financial statements of Cooperative Central Bank Ltd that

include the Cooperative Credit Institutions and the Companies of Trading Sector which are controlled (the “Group”)

for the year ended 31 December 2014.

Incorporation

The Bank was founded in Cyprus in 1937 (registration number 88) as a Cooperative Limited liability Company, in

accordance with Article 11 of the Cooperative Companies Law of 1923 and 1937.

Principal activities

CCB is the main shareholder of the 18 Cooperative Credit Institutions (“CCIs”) while exercising control over

companies with trading activities. The principal activities of the Group, which have not changed from prior year, is

the provision of banking and financial services and the carrying out of 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 of the Group before the provisions for impairment decreased by 1,6% and amounted

to €192.355 thousands compared to €195.428 thousands for 2013. After the increase in the provision for impairment

of loans and other advances of €166.050 thousands, and the tax credit of €15.220 thousands, a profit for the year of

€41.201 thousands was generated compared to a loss of €1.697.694 thousands for 2013. The Company returned to

profitability mainly due to the restriction in the provision for impairment of loans and other advances.

Deposits and other customer accounts as at 31 December 2014 amounted to €12.392.608 thousands showing an annual

decrease of €1.084.541 thousands or 8%. Loans and other advances to customers after provisions on 31 December

2014 amounted to €10.126.728 thousands showing an annual decrease of €651.412 thousands or 6%. The Group's

equity after the successful recapitalization for an amount of €1,5 billions from the financial support programme,

amounted to €1.221.534 thousands and the Total Capital ratio to 13,56%.

RESTRUCTURING PLAN AND STRENGTHENING OF THE CAPITAL BASE OF COOPERATIVE

CREDIT SECTOR

The Cooperative Central Bank Limited prepared a Restructuring Plan (“The Plan”) for the Cooperative Credit Sector

("CCS") that was approved on 24 February 2014 by the European Commission. The European Commission states that

the measures for the recapitalization and restructuring of CCIs, are in accordance with its rules for cases for which

government support is granted. The main objectives of the Plan are:

Regaining the confidence of depositors

Decrease of operating costs and improvement of profitability

Introduction of a Non-Performing Loans Division aiming quality improvement of the portfolio of loans and

other advances

Strengthening of Capital Adequacy

Strengthening the operational framework of Corporate Governance

Downsizing branch network

Strengthening of internal audit function and Risk Management framework

Divestment of the Trading activities of the Cooperative Credit Sector

As a result of the approval of the Restructuring Plan for the CCS, on 28 February 2014 the European Stability

Mechanism signed an agreement (Subscription 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.

Total net income

The Group's total net income for the year ended 31 December 2014 was €392.636 thousands (2013: €398.951

thousands).

3


Dividends

The Committee does not recommend the payment of a dividend. In accordance with the provisions of the Minister of

Finance Decree for the recapitalization of CCB – Central Body as well as the List of Commitments signed between

the Republic of Cyprus and the Bank during the announcement of the Restructuring Plan to the European Commission,

the Bank is not permitted to pay any dividends for the financial years until 2016.

Future developments

As stated in notes 1.2, 3.12-3.18 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 it will continue its efforts for the smooth

operation of the Bank and the CCIs. Particular emphasis is given to the strict compliance of the Restructuring Plan

with the aim of retaining and strengthening the capital adequacy ratios, ensuring a healthy liquidity position and an

effective credit risk management.

Main risks, uncertainties and risk management

The most important risks faced by the Cooperative Central Bank and CCIs are credit risk, market risk, liquidity risk

and capital management 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 46 of the consolidated financial statements.

Share capital

On 29 January 2014, a decree of the Minister of Finance was published in the Cyprus 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, a Cooperative Holding Company of CCB was incorporated according to article

12E of the Cooperative Companies Law, to which all existing shareholders of CCB are transferred with a participation

to its capital proportionally to the participation each shareholder had in the share capital of CCB.

On 28 February 2014, the General Meeting of members of the Bank approved the reduction in the nominal value per

share from €8,54 to €1,28 as well as the increase in the number of shares of the authorized share capital to

1.562.500.000.

On 10 March 2014 the Bank issued 1.171.875.000 shares of €1,28 each to the Republic of Cyprus, for the purpose of

the recapitalization of the Cooperative Credit Sector.

Committee

The members of the Committee during the year and at the date of this report are shown on page 1. Mr. Panayiotis

Philippou was appointed on 19 January 2015 and resigned on 30 March 2015. Mr. Efthymios Pantazis resigned on 7

November 2014.

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 2014 until the date of approval of the consolidated financial

statements are mentioned in note 50 of the consolidated financial statements.

Related party transactions

Disclosed in note 44 of the consolidated financial statements.

4


Independent Auditors

The independent auditors of the Bank, KPMG Limited, have expressed their willingness to continue in office.

By order of the Committee,

Chairman

Nicosia, 28 April 2015

5

CORPORATE GOVERNANCE

Introduction

Corporate Governance is defined as the system of principles, practices and the adjustments governing the operation,

the organization, the management and the control of a company, with the objective of increasing its value and protect

the legal rights of its shareholders and all stakeholders related to the Bank.

The Corporate Governance framework which is implemented by the Cooperative Central Bank has the following main

pillars:

The compliance with the supervisory and legislative framework governing the operation of the Bank,

The transparency,

The separation of duties,

The determination of responsibilities,

The improvement of effectiveness,

The increasing of value,

The protection of the legal rights of all involved parties.

The Bank fully complies with the Decree of the Central Bank of Cyprus (“CBC”) “Directive on Governance and

Management Arrangements in Credit Institutions of 2014” and with all the provisions of the supervision which is

exercised from CBC.

Approval Authority

The Committee approves the Corporate Governance framework and also has the authority for its revision.

Generally the Corporate Governance framework specifies the operation structure, provides guidelines for the

governance of the Bank and ensures that the Bank is governed taking into consideration the legal and business interests

of the shareholders and all other stakeholders.

The Corporate Governance framework further specifies the duties and the responsibilities of the Committee and its

sub-committees, of the Executive Committee and of the other committees of the Bank as well as how these committees

collaborate, as well as the reporting lines between the different levels.

Committee

The members of the are recommended and appointed in accordance to the Provisions of the Decree of the Finance

Minister for the recapitalization of the Cooperative Credit Sector, the Relationship Framework Agreement (“RFA”)

for cooperation with the Ministry of Finance, the Cooperative Companies Laws and Institutions and the “Directive on

Governance and Management Arrangements in Credit Institutions of 2014” of the CBC. The members of the are

approved by the Special General Assembly of the shareholders.

The Committe is composed of 11 members, distinguished in executive and non-executive members. The independent

non-executive members of the Committee must comply with the fit and proper criteria which are in line with the

CBC’s “Directive on the Assessment of the Fitness and Probity of Members of the Management Body and Managers

of Authorized Credit Institutions of 2014”.

6


Committee (continued)

The members of the Committee are separated into:

Nine (9) non-executive members, seven (7) of which are independent non-executive and are appointed by the

Minister of Finance of the Republic of Cyprus with the assent of the Governor of the Central Bank of Cyprus and

the Parliament Committee on Financial and Budgetary Affairs.

Two (2) executive members which are appointed by the majority of the non-executive members of the Committee

of the Bank. One of the executive members is the General Manager of the Bank.

The overarching commitment and duty of the Committee is to constantly pursue the improvement of the long-term

financial value of the Bank and protection of the Bank’s general corporate interest, taking into consideration the

interests of all stakeholders.

The Committee is responsible for:

Defining the business goals of the Bank,

Defining and supervising the strategy of the Bank set for achieving its business goals,

The implementation and monitoring of the effectiveness of governance measures,

The effective supervision of the General Manager and of the Executive Committee (EC) of the Bank,

The appointment and succession of the General Manager of the EC,

The appointment and succession of the members of the Committees of the CCIs,

The appointment and succession of EC of the CCIs,

Ensuring the independence of the control units,

The effective and prudent management of the Bank,

Ensuring the longer-term financial interests of the Bank,

As well as the interests of the depositors, the shareholders and all other stakeholders.

The Committee meets regularly with the view of conducting its duties. During 2014, the Committee met 55 times.

On 31st December 2014 the Committee was composed of the following members:

Chairman Nicolas Hadjiyiannis Independent Non-Executive Chairman

Members Charalambos Christodoulides Independent Non-Executive Member

George Strovolides Independent Non-Executive Member

Georgios Kittos Independent Non-Executive Member

Panicos Pouros Independent Non-Executive Member

Lambros Pieri Independent Non-Executive Member

Athanasios Stavrou Independent Non-Executive Member

George Hadjinicola Non-Executive Member

Demetris Theodotou Non-Executive Member

Marios Clerides Executive Member – General Manager

For all the members of the Committee of the Bank, the assent of CBC has been obtained in accordance with “Directive

on the Assessment of the Fitness and Probity of Members of the Management Body and Managers of Authorized

Credit Institutions of 2014”.

Mr. George Strovolides has been appointed as the higher ranked independent member of the Committee.

7


Separation of Powers

The Corporate Governance Framework aims to separate the duties of the highest level in the management pyramid

i.e. between the Committee and the Executive Management.

The clear separation of responsibilities and powers, ensures that all the decisions are taking into consideration the best

interests of the Bank.

Annual Emoluments

According to the letter of the Minister of Finance dated 15 April 2014 the annual emoluments of the members of the

Committee of the Bank are:

Chairman of the Committee of the Bank - €50.000 irrespective of the number of committee participations

Vice-president of the Committee of the Bank - €38.000 irrespective of the number of committee

participations

Non-Executive Members of the Committee of the Bank - €15.000 plus €2.000 for each committee

participations

Chairman

The Chairman presides over the Committee and is responsible for determining the daily agenda, for ensuring that

smooth conduct of the meetings of the Committee, as well as the effective conduct of the meetings of the Committee.

The Chairman is also responsible for ensuring the proper and timely communication to the members of the Committee

and the effective communication with all the shareholders.

Conflict of interests

The members of the Committee are required to act with integrity for the interest of the Bank, not to be in conflict with

the Bank and to avoid any activity that creates or will create conflict between their personal or professional interests

and that of the Bank.

The members of the Committee shall contribute their experience and dedicate the required time for executing their

duties and taking decisions.

Committees

The following are the Committees of the Bank:

1. Audit Committee

2. Risk Committee

3. Remuneration Committee

4. Candidates Nomination Committee

5. Cooperative Sector Restructuring Committee

All Committees aim to ease the operations of the Committee by providing advice and preparing and submitting reports

which relate to their activities.

8


Committees (continued)

All of the Committees have been established and operate in accordance to the provisions of the relevant Decree of the

Central Bank of Cyprus.

Audit Committee

The main responsibilities of the Audit Committee are:

a) The supervision of the adequacy and effectiveness of the internal audit function and especially the operations of

the Internal Audit and Compliance Units

b) The assessment of findings and recommendations of audits

c) The submission of proposals to the Committee in relation to the appointment of independent auditors.

During 2014 the Audit Committee met 38 times.

As at 31st December 2014 the composition of the Audit Committee was as follows:

AUDIT COMMITTEE

George Strovolides Chairman

Lambros Pieri Member

Georgios Kittos Member

George Hadjinicolas Member

Charalambos Christodoulides Member

The Audit Committee confirms that is has been satisfied for the independence of the internal audit procedures. This

conclusion was based on the following:

To the administrative structure of the Company and the meetings held with the Internal Auditor

To the assessment of the effectiveness of Internal Audit

To the assessment of the results of other checks.

Risk Committee

The main responsibilities of the Risk Committee are:

a) Formulating and monitoring the strategy for taking risks of all kinds, within the broader strategy and policies of

the Group

b) The development of internal system for managing risks

c) The determination of principles governing risk management

d) The assessment, on an annual basis, of the sufficiency and effectiveness of the policies for managing risks and

the suitability of boundaries, the sufficiency of provisions and the sufficiency of equity, as a whole, in relation to

the importance and the type of the assumed risks.

During 2014 the Risk Committee met 21 times.

As at 31st December 2014 the composition of the Risk Committee was as follows:

RISK COMMITTEE

Athanasios Stavrou Chairman

Demetris Theodotou Member

Charalambos Christodoulides Member


Panicos Pouros Member

9



Remuneration Committee

The main responsibilities of the Remuneration Committee are:

a) The determination of guidelines in relation to the remuneration and benefits of the General Manager and the

Executive Committee of the Bank

b) The assessment of the employment contract of the General Manager of the Bank and of the CCIs as well as their

performance

c) The assessment of the employment contract of EC of the Bank and of the CCIs

During 2014 the Remuneration Committee met 5 times.

As at 31st December 2014 the composition of the Remuneration Committee was as follows:

REMUNERATION COMMITTEE

Lambros Pieri Chairman

Nicolas Hadjiyiannis Member




Candidates Nomination Committee

The main responsibilities of the Candidates Nomination Committee are:

a) The implementation of best practices of internal governance of CCB and CCIs

b) The assessment of the effectiveness of the Committee from a corporate governance perspective

c) The assessment, on an annual basis, of the skills, knowledge and the expertise of the members of the Committee

d) The determination of the selection procedure and the appointment of the members of the Committee of the Bank

and of the CCIs

e) The independent and with objective evidence candidates nomination

During 2014 the Candidates Nomination Committee met 8 times.

As at 31st December 2014 the composition of the Candidates Nomination Committee was as follows:

CANDIDATES NOMINATION COMMITTEE

Panicos Pouros Chairman

Nicolas Hadjiyiannis Member

Lambros Pieri Member

George Strovolides Member


10



Cooperative Sector Restructuring Committee

The main responsibility of the Restructuring Committee is to support the Committee to the fulfillment of its duties in

relation to the implementation of the Restructuring Plan, as approved by the European Commission (Directorate-

General for Competition).

During 2014 the Restructuring Committee met 6 times.

As at 31st December 2014 the composition of the Restructuring Committee was as follows:

CANDIDATES NOMINATION COMMITTEE

Charalambos Christodoulides Chairman

Athanasios Stavrou Member

George Strovolides Member

Panicos Pouros Member


11

Independent Auditors’ Report

To the Members of

Cooperative Central Bank LTD

Report on the consolidated financial statements of the Cooperative Central Bank Ltd

We have audited the accompanying consolidated financial statements of Cooperative Central Bank LTD (the ''Bank'')

and its subsidiaries (together with the Bank, ''the Group'') on pages 13 to 105 which comprise the consolidated

statement of financial position as at 31 December 2014, and the consolidated statements 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.

Basis for qualified opinion regarding the comparability of amounts shown in the consolidated statements of profit or

loss and other comprehensive income, changes in equity and cash flows of the year and the respective amounts of

2013.

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.

12

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, and the information relating to it, for the year ended 31 December 2013 that are

presented as the respective figures in the current year in the consolidated statements of profit or loss and other

comprehensive income and changes in equity, and,

in relation to the net cash flows and the amounts presented in the consolidated statement of cash flows as the

respective figures for the current year.

Our audit opinion for the year ended 31 December 2013 has been amended accordingly.

Our opinion on the financial statements for the current year has also been amended due to the probable effect of this

matter on the comparability of amounts for the current year with the respective amounts of the previous year.

Qualified opinion regarding the comparability of amounts shown in the consolidated statements of profit or loss and

other comprehensive income, changes in equity and cash flows of the year and the respective amounts of 2013.

In our opinion, except for the effect on the respective amounts of the previous year 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 2014 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 2014, 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 LTD 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 4 is consistent with the

consolidated financial statements.

13

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.

Michael M. Antoniades, FCA

Certified Public Accountant and Registered Auditor

for and on behalf of

KPMG LTD

Certified Public Accountants and Registered Auditors

14 Esperidon Street

1087 Nicosia

Cyprus

28 April 2015


14

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


2014 2013

Note

€'000 €'000

Interest income 7 689.747 886.912

Interest expense 8 (310.855) (475.182)

Net interest income 378.892 411.730

Income from fees and commissions 33.968 36.710

Expenses for fees and commissions (8.275) (1.899)

Other net losses 9 (30.346) (61.138)

Other income 10 18.397 13.548

Total net income 392.636 398.951

Staff costs 11 (121.455) (125.633)

Depreciation 13 (12.451) (13.785)

Other operating expenses 14 (66.375) (64.105)

Total expenses (200.281) (203.523)

Operating profit before provisions for impairment 192.355 195.428

Share of results of associates before tax 29 3 8

Charge for impairment in value of investments held to maturity 24 - (16.900)

Charge for impairment of financial assets available for sale 23 (327) (4.234)

Increase in provisions for impairment of loans and other advances 19 (166.050) (1.868.796)

Profit/(loss) before tax 25.981 (1.694.494)

Tax 15 15.220 (3.200)

Net profit/(loss) for the year 41.201 (1.697.694)

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

(844) (22.242)

Tax on other comprehensive income 15 1.845 (356)

1.001 (22.598)

Items that may be reclassified in subsequent periods to profit or loss:

Available for sale financial assets - Fair value gains 23 690 3.360

Other comprehensive income/(expense) for the year 1.691 (19.238)

Total comprehensive income/(expense) for the year 42.892 (1.716.932)

Profit/(loss) attributable to:

Equity holders of the Bank 40.688 (1.697.694)

Non-controlling interests 513 -

Profit/(loss) for the year 41.201 (1.697.694)

The notes on pages 21 to 105 form an integral part of these consolidated financial statements.


15

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

(continued)


2014 2013

Note

€'000 €'000

Total comprehensive income/(expense) attributable to:

Equity holders of the Bank 42.407 (1.716.932)

Non-controlling interests 485 -

Total comprehensive income/(expense) for the year 42.892 (1.716.932)

Basic and Diluted profit/(loss) per share (€cent) 16 4,12 (14.378,71)



16

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December 2014

2014 2013

Note €'000 €'000

ASSETS

Cash 116.128 100.837

Deposits with central banks 17 417.537 959.275

Deposits with other banking institutions 18 43.359 64.133

Loans and other advances to customers 19 10.126.728 10.778.140

Inventories 20 38.983 44.676

Properties held for sale 21 79.582 83.321

Financial assets at fair value through profit or loss 22 - 202

Available for sale financial assets 23 47.570 24.825

Investments held to maturity 24 2.409.781 1.017.476

Investment properties 25 248.157 254.990

Property, plant and equipment 26 319.184 331.864

Intangible assets 27 1.272 1.785

Investments in associates 29 207 208

Deferred tax assets 39 16.755 580

Other assets 30 71.619 46.279

Total assets 13.936.862 13.708.591

LIABILITIES

Amounts due to other bank institutions 31 94.343 83.600

Deposits and other customer accounts 32 12.392.608 13.477.149

Repurchase agreements 33 - 202.581

Other loans 34 21.300 74.206

Loans for the repayment of refugee deposits 35 36.534 36.534

Loan capital 36 - -

Deferred tax liabilities 39 45.902 49.520

Other liabilities 37 92.391 78.104

Total liabilities 12.683.078 14.001.694

EQUITY

Share capital 40 1.515.113 100.836

Reserves 41 (289.573) (393.939)

Equity attributable to equity holders of the Bank 1.225.540 (293.103)

Non-controlling interests 28.244 -

Total equity 1.253.784 (293.103)

Total equity and liabilities 13.936.862 13.708.591

Contingent liabilities and commitments 43 487.090 672.264

On 28 April 2015, the Committee of Cooperative Central Bank Ltd approved these consolidated financial statements

for issue.

…................................. …................................. …................................. ….................................

Chairman Vice Chairman General Manager Chief Financial Officer



17

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


Share

Capital

Fair value

reserve-land

and buildings

Fair value

reserve –

available-for-

sale financial

assets

Merger

reserve

Statutory

reserve

required by

law

Dilution of

shares

nominal value

reserve

Profit

available for

distribution Total

Non-

controlling

interests

Total

€’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000

Balance – 1 January 2014 100.836 166.708 (3.813) 39.918 (596.752)

- - (293.103)

-

(293.103)

Comprehensive income

Net profit the year - - - - - - 40.688 40.688 513 41.201

Other comprehensive income, after

tax

Change in fair value reserve – land

and buildings - 1.035 - - - - - 1.035 (34) 1.001

Change in fair value reserve –

available-for-sale financial assets - - 684 - - - - 684 6 690

Transfer from fair value reserve –

land and buildings to profit available

for distribution - (4.567) - - - - 4.567 - - -

Other comprehensive income for the

year - (3.532) 684 - - - 4.567 1.719 (28) 1.691

Transactions with owners of the

Bank

Issue of share capital 1.500.000 - - - - - - 1.500.000 - 1.500.000

Decrease in nominal value of shares (85.723) - - - - 85.723 - - - -

Increase in merger reserve - - - 3.995 - - 3.995 - 3.995

Transfer of profit for the year - - - - 45.255 - (45.255) - - -

1.414.277 - - 3.995 45.255 85.723 (45.255) 1.503.995 - 1.509.995

Changes in ownership interests in

subsidiaries

Loss on deemed disposal - - - - (27.759) - - (27.759) 27.759 -

Balance at 31 December 2014 1.515.113 163.176 (3.129) 43.913 (579.256) 85.723 - 1.225.540 28.244 1.253.784


COOPERATIVE CENTRAL BANK LTD CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


18


Share

Capital

Fair value

reserve-

land and

buildings

Fair value

reserve –

available-for-

sale financial

assets Merger reserve

Statutory

reserve

required by

law

Dilution of

shares nominal

value reserve

Profit available

for distribution Total

Non-

Controlling

interests

Total

€’000 €’000 €’000 €’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 - 1.424.083

Comprehensive income

Net loss for the year - - - - - - (1.697.694) (1.697.694) - (1.697.694)

Other comprehensive income

after tax

Changes in fair value

reserve - land and buildings - (21.886) - - -

- - (21.886)

- (21.886)

Changes in fair value

reserve - available-for-sale

financial assets - - 3.360 - -

-

- 3.360

- 3.360

Provison for charity purposes - - - - (1.758) - - (1.758) - (1.758)

Other comprehensive expense for

the year - (21.886) 3.360 - (1.758)

- - (20.284)

-

(20.284)

Transactions with owners of the

Bank

Increase in merger reserve - - - 792 - - - 792 - 792

Transfer of loss for the year - - - - (1.697.694) - 1.697.694 - - -

- - - 792 (1.697.694) - 1.697.694 792 - 792

Balance at 31 December 2013 100.836 166.708 (3.813) 39.918 (596.752)

- - (293.103)

-

(293.103)


19

CONSOLIDATED STATEMENT OF CASH FLOWS


2014 2013

Note €'000 €'000

Cash flows from operating activities

Profit/(loss) before tax 25.981 (1.694.494)

Adjustments for:

Depreciation of property, plant and equipment 26 11.678 12.859

Amortization of computer software 27 773 922

Amortization of rights for use 27 - 4

Provision for impairment of loans and other advances to customers 19 166.050 1.868.796

Share of profit and write offs from associates 29 - 4

Loss on disposal of property, plant and equipment 26 81 77

Fair value loss on investment properties 9 16.762 32.734

Loss on disposal of properties held for sale 9 126 42

Loss on disposal of investments held to maturity 9, 24 470 -

Fair value gains on financial assets at fair value through profit or loss 22 - (49)

Impairment charge on investments held to maturity 24 - 16.900

Impairment charge on financial assets available for sale 23 327 4.234

Impairment charge on investment properties 9 1.346 2.654

Impairment charge on intangible assets 9 39 -

Impairment charge on properties available for sale 9 4.067 17.813

Impairment charge on property, plant and equipment 9 183 7.867

Credit in results for employee retirement plans - (4.077)

Income from investments in debt securities 7 (46.164) (58.250)

Dividend income (47) (23)

Cash flows from operating activities before changes in: 181.672 208.013

Deposits with central banks 33.253 -

Deposits with other banking institutions (3.442) 10.315

Loans and other advances to customers 485.362 599.478

Repurchase agreements (202.581) 1.123

Inventories 4.347 4.402

Properties held for sale 77 (22.791)

Financial assets at fair value through profit or loss - (5)

Other assets (25.340) 15.330

Customer deposits (1.084.541) (1.723.738)

Amounts due to other bank institutions 10.743 -

Deferred income (90) (8)

Other liabilities 15.442 (4.678)

Cash flows used in operating activities (585.098) (912.559)

Tax paid (743) (4.955)

Payment for employee retirement schemes - (1.210)

Dividend income 47 23

Net cash flows used in operating activities (585.794) (918.701)



CONSOLIDATED STATEMENT OF CASH FLOWS


20

Cash flows from investing activities

Proceeds from disposal of investments held to maturity 24 89.917 699.421

Proceeds from disposal of financial assets available for sale 23 11.140 -

Proceeds from disposal of property, plant and equipment 26 113 2.289

Proceeds from disposal of investment properties 25 1 556

Income from investments in debt securities 7 46.164 58.250

Payment for acquisition of property, plant and equipment 26 (10.537) (30.477)

Payment for acquisition of intangible assets 27 (286) (268)

Payment for acquisition of investment properties 25 (248) (4.650)

Payment for acquisition of available for sale financial assets 23 (14.974) (12.665)

Net cash flows from investing activities 121.290 712.456

Cash flows from financing activities

Repayments of loan capital 36 - (20.110)

Repayment of other loans 34 (52.906) -

Net cash flows used in financing activities (52.906) (20.110)

Net decrease in cash and cash equivalents (517.410) (226.355)

Cash and cash equivalents at beginning of the year 969.701 1.196.056

Cash and cash equivalents at end of the year 42 452.291 969.701


COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


21

1. General 1.1 Incorporation

The Cooperative Central Bank Limited (the “Bank” or “'CCB”) was founded in Cyprus in 1937 (registration number

88) as a 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 Gregori Afxentiou Street, 1096 Nicosia, P.O. 24537, 1389 Nicosia.

1.1.1 Restructuring Plan

According to the Memorandum of Understanding which was agreed between the Republic of Cyprus and the

European Central Bank, the European Committee and the International Monetary Fund (“Troika”) the number of

Cooperative Credit Institutions (CCIs) was reduced to 18, with the General Meetings of the Members approving the

mergers in September 2013. On 4 October 2013, a decree for the nationalization of the Cooperative Movement was

issued along with the increase of the share capital by €1,5 billion.

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 CCB is 99% and that of the existing shareholders is 1%. At the same time, CCB became a 99% shareholder

in the remaining 18 Cooperative Credit Institutions. For this purpose, a Cooperative Holding Company of CCB was

incorporated according to article 12E of the Cooperative Companies Law, to which all existing shareholders of CCB

are transferred with a participation to its capital proportionally to the participation each shareholder had in the share

capital of CCB. The recapitalization of CCB was implemented through granting of a bond issued by the European

Stability Mechanism in accordance to an agreement signed on 28 February 2014 whilst the recapitalization of the

CCIs was implemented through issuing shares to CCB; the existing shareholders of the CCIs were transferred to

holding companies.

1.1.2 The Group

CCB is the main shareholder of the 18 CCIs whilst it is also exercising control over companies with trading activities.

1.2 Public finances adjustment program and operating environment

1.2.1 Economic Adjustment Program

In March 2013 the negotiations between the Cyprus Government and the Eurogroup were concluded, and an

agreement was reached for the provision of financial support towards the Cyprus Government of up to €10 billion and

the development of a macroeconomic adjustment program. 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 targets of the program is to restore the robustness of the Cyprus banking sector and the trust of the depositors

and the market, to continue the current process of reorganizing public finances and to implement corrective reforms

in order to support the competitiveness and a sustainable and balanced growth, allowing the correction of the

macroeconomic imbalances.

Additonally, it was decided that Bank of Cyprus and Laiki Bank will be set under resolution status and that the assets,

secured deposits and the €9 billion drawn 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, whilst Bank of Cyprus issued, in August 2014, new shares amounting

to €1 billion to private investors.

1.2.2 Assessments of the implementation of the Economic Adjustment Program

The progress of the adjustment program of the Cypriot economy has been assessed four times by Troika. The fifth

assessment of the program begun in July 2014, but has not been completed yet due the outstanding foreclosure law

relating to the modernization of the disposal process of mortgaged properties, through private auctions. The law

constitutes a precondition, and even though it has been voted by the Parliament its implementation was outstanding

before the Parliament, in order to be applied simultaneously with the bill relating to the insolvency framework.



22

1. General (continued)

1.2 Public finances adjustment program and operating environment (continued)

1.2.2 Assessments of the implementation of the Economic Adjustment Program (continued)

On 18 April 2015, the Parliament has voted the bills relating to the insolvency framework whilst the suspension for

implementing the foreclosure law ended on 16 April 2015. These enabled the completion of the fifth assessment of

the progress of the adjustment program, the participation of Cyprus into the quantitative easing program of the

European Central Bank (“ECB”), the disbursement of the outstanding tranche of the program from IMF and the return

of Cyprus to the international markets.

The insolvency framework introduces repayment plan mechanisms relating to solvent individuals, a modernized

bankruptcy procedure relating to insolvent individuals, which will include the exemption of a bankrupt individual

under strict conditions, which will prevent any abuses. It is noted that suspension is allowed, according to specific

criteria and conditions, of any measures taken against insolvent borrowers for a period of six months.

Additionally, it adopts the possible exemption of insolvent individuals who are without any income and possess very

few assets and have a very low unsecured debt through the process of the Decree Discharge Debt under strict

conditions, procedures that will enable the effective restructuring of debts and operation of viable companies and a

modernized procedure for liquidating companies.

All of the bills contribute towards the modernization of practices that affect the operations of the Banks, concerning

loans and other advances. The practical effects will develop through the implementation of the bills and the relevant

regulations and will systematically be assessed from the Committees of CCB and CCIs.

1.2.3 Restrictive measures on banking transactions

The decisions taken in March 2013 included the issuance of decrees concerning restrictive measures on banking

transactions. The scope and duration of the restrictive measures are decided and revised by the Minister of Finance

and the Governor of the Central Bank of Cyprus. The temporary restrictions on bank transactions and cash

transactions, related to capital included already in the system in March 2013 and included restrictions on withdrawals

of cash, clearing of cheques and restrictions on money transfers to other credit institutions in Cyprus and abroad.

On 6 April 2015 all of the restrictive measures on the banking transactions were lifted.

1.2.4 Agreement between CCB and European Investment Bank

On 23 May 2014 CCB announced a new Financing Plan for Small and Medium-sized Enterprises, that is offered by

the Cooperative Sector in cooperation with the European Investment Bank (EIB). This is the first cooperation between

EIB and a Cypriot organization, after the events of the Eurogroup in March 2013. This Plan provides support to the

small and medium-sized enterprises in Cyprus through a loan agreement amounting to €50 million that has been

reached between CCB and EIB, on behalf and for account of the CCIs.

1.2.5 Amendments to the regulatory framework

The supervision of the Group has been taken over by the European Central Bank (“ECB”) and the Central Bank of

Cyprus (“CBC”) in the context of the Single Supervisory Mechanism. The supervisory framework is dynamic and

therefore its requirements may differentiate with possible effects on capital adequacy for instance.

The Central Bank of Cyprus (CBC) having evaluated the current regulatory framework in relation to the provision of

advances, the procedure for impairment of assets and provisions and the handling of collateral relating to provided

assets, has started to implement regulatory amendments. On 17 February 2014 the Central Bank of Cyprus issued a

directive that covers the provisioning policy of loans and the provisioning procedures.



23

1. General (continued)

1.2 Public finances adjustment program and operating environment (continued)

1.2.6 Interest rates

With an announcement on 24 April 2014, CBC stated that there was an agreement with Cypriot credit institutions,

which provides that if the interest rate for deposits offered by the credit institutions exceed euribor plus 300 basis

points, then the credit institution would be required to maintain additional own funds. On 16 February 2015 the Board

of Directors of CBC has resolved to proceed with differentiating the maximum depositary interest rate, as stated in

the relevant calculation formula for measuring additional capital requirements for banks, by decreasing it by one 1%.

On 13 February 2015 the Committee of CCB resolved to proceed from 1st March 2015 with 1% decrease in interest

rates for all performing mortgage loans. On 26 February 2015 the Committee of CCB having assessed the decision

by CBC for reducing the depositary interest rates by 1%, has further reduced the borrowing rates on performing loans

of all types, aiming for relief of borrowers.

1.2.7 Decisions of European Central Bank

On 2 October 2014 ECB announced the terms of operations for the asset-backed securities program and for the

program of buying secured bonds. These terms were approved by the Board of Directors. These programs will last for

at least two years and their objective is to enhance the implementation mechanism of the monetary policy and to

support the provision of credit facilities towards the economy of the Eurozone. The asset purchase program, which

will be governed by suitability criteria that have been enacted in accordance with the Eurosystem framework for the

introduction of safety measures, begun in the fourth quarter of 2014, starting with covered bonds.

On 22 January 2015 ECB announced the commencement of the Quantitative Easing program. The program begun

implementation on 9 March 2015 and will finish by the end of September 2016 and will cost €60 billion per month.

Cyprus can benefit from this program with bonds up to the amount of €500 million.

The amount of purchases will be equivalent to the participation each country has to the balance sheet of ECB, will

relate to securities which belong to an investment grade, while there are additional criteria for countries on reform

programs, such as Cyprus and Greece.

Especially for the countries which are under such assessments, the program provides that purchases will be suspended

during the period that assessments are not progressing and will resume only when the assessment has been successful.

There are limits at 33% per debt issuer and 25% per issue, while the program anticipates risk apportionment at 20%

for the ECB and at 80% for the National Central Banks which will engage in these purchases.

The program relates to combined purchases of both public and private debt, while the centralized coordination will

be managed by ECB. The funds that the banks will receive from the bonds will either be used to finance the private

sector or to be deposited at ECB, with negative, however, interest rate. Having announced the program, the exchange

rate for Euro/US Dollar has weakened while there was a reduction in the yields of bonds across the countries of the

Eurozone. Meanwhile, ECB improved the terms of the longer-term refinancing operations (LTRO’s) by reducing the

interest rate.

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 and the provision of trading services. All activities are carried out in Cyprus.

1.4 Turnover

The turnover of the Group consists of revenue from interest, fees and commissions and other income.



24

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 Law of

1985 as amended from time to time.

2.2 Functional and presentation currency

The consolidated financial statements are presented in Euro (€), which is the functional currency of the Bank and its

subsidiaries. The amounts presented in the consolidated 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 the consolidated 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, available for sale financial assets and 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 3.12 until 3.18 of the consolidated financial

statements, the management and the Committee of the Bank have been satisfied on the basis of the analysis in note

3.19, 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 requires from management the exercise of judgment, 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 the Bank’s management in relation to current conditions and actions, actual results may

deviate from such estimates.

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 Provision for impairment of loans and other advances to clients

The Group reviews its advances to customers to assess whether there is a need to record a provision, which is

recognized in profit or loss and is reflected in an impairment account of advances.

The Group assesses whether there is objective evidence of impairment in its loan portfolio on an individual and

collective basis.



25

3. Use of estimates and judgments (continued)

3.1 Provision for impairment of loans and other advances to clients (continued)

Indicatively, the following events may be considered from the Group as an indication for impairment. It should be

noted that an event on its own may not be considered an indication for impairment and the absence of a specific event

does not exclude the existence of an impairment:

1. Credit facilities which have been classified as non-performing

2. Restructured advances which are included in performing advances

3. Significant and continuous decrease in total income/future cash flows from borrowers

4. Apparent deterioration of the borrower’s ability to meet its obligations.

5. Significant decrease in the value of collaterals

6. Credit facilities for which a provision has been recognized

7. Macroeconomic indications which may affect the expected future cash flows of borrowers such as an increase in

unemployment levels and a decline in real estate

Impairment losses on loans and other advances to customers which are examined on an individual basis, are calculated

as the difference between the carrying amount with the recoverable amount of the value of the collateral and the

present value of estimated future cash flows based on the borrower’s activities. The value of collateral is a significant

factor in calculation of the impairment loss. The estimated future cash flows associated with the divestment of

collateral are based on assumptions about a number of factors (such as fluctuating prices for real estate index, selling

costs, sales value) and therefore actual impairment losses may differ. Any decrease in the fair value of those collaterals

would mean a further increase of the required provisions for impairment of advances.

For advances which were examined on an individual basis and for which no impairment has been identified and for

advances which were not examined on an individual basis, the potential losses are examined and evaluated

collectively. In determining an individual basis for the collective provisions a standardized approach is adopted

including the use of models. These advances are classified into groups with similar credit risk characteristics (such

as existence of collateral, type of collateral, loan class, existence of arrears) and are separately evaluated on whether

an indication for impairment exists. This approach ensures conformity and presentation of similar credit behaviors

amongst borrowers in each category. The calculation of the provision for impairment is based on the historical trends

of losses demonstrated by the relevant groups with similar risk characteristics in the Group.

In calculating collective provisions, quantitative parameters are calculated and subsequently applied, such as the

possibility of default, the percentage of loss in case the loan is default, the possibility that the current position worsens

and the possibility of improvement. All parameters are calculated per portfolio of similar characteristics and are based

on the recent historical trends of the Group’s portfolio. The historical loss experience is supplemented with the

management’s estimates in order to evaluate whether the current economic conditions are such that the actual losses

are greater or less than the losses incurred in the past.

For each category of credit facilities the probability of default is calculated, defined as the ratio of the balance of loans

in default over one year and the balance of the total performing loans at the beginning of the year. A similar

methodology is applied in calculating the possibilities of worsening (roll rates) and improvement (cure rates). For

calculating the amount of losses, the weighted average of the difference between the carrying value of the facility and

the recoverable amount arising from the present value of collaterals and the future cash flows from operations of the

borrower is estimated for each category of the portfolio.

The procedure for calculating the provisions is based on various assumptions. The main assumptions relate with the

assessment of the Group for the future value of properties, the time required for the divestment of a collateral, the

selling costs, the impairment of a property put up for sale (forced sale discount), but also the assumption that in some

cases the future cash flows will demonstrate similar behavior to that of the recent past. To calculate the current and

future value of the property a proper indicator is used, which is based on the projections of macroeconomic conditions

and other factor affecting property prices. A decrease in the future value of the properties is applied, which is a total

of approximately 15% , while the timeframe for liquidating a property is set at five years from the time of the first

evaluation in which it was considered necessary that an impairment provision will be recognized.



26


3.1 Provision for impairment of loans and other advances to clients (continued)

It is noted that the Group grants loans and other advances to customers, that are secured by guarantees in the Republic

of Cyprus. The Group does not recognize any provision for impairment on these advances due to the existence of

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 under the existing agreements with the

Government and as a result it has not recognized any provision for this category of loans.

The total amount of the provision for impairment of the advances of the Group is inherently uncertain due to the

sensitivity to changes in economic and credit conditions and also due to the subjectivity in determining certain

assumptions. Any differentiations in the assumptions made, is likely to result in fluctuations in the level of provision

required. The methodology and assumption used for the determination of the provision for impairment are reassessed

in regular intervals. It is possible that the actual conditions in the next financial year differ from the assumptions that

have been made, resulting in a material adjustment to the carrying values of the advances.

3.2 Impairment of goodwill and investments in subsidiary companies

The procedure for recognizing and assessing the impairment of goodwill and investments in subsidiary companies is

inherently uncertain because it requires the management’s judgment on a number of estimates, the results of which

are important for the assumptions used. The assessment for impairment constitutes the best estimate of the

management and is based on the net position of each subsidiary company as recorded in the statement of financial

position of the Bank.

Any impairment of goodwill of acquired entities affects the results of the Group while any impairment on the value

of the investments in subsidiaries affects the performance of the Bank.

3.3 Impairment of available for sale financial assets

Shares available for sale are impaired when the decrease in the fair value compared to the cost value is significant or

prolonged. In this case, the total loss previously recognized in equity, will be recognized in the consolidated statement

of profit or loss and other comprehensive income. The determination of what is considered significant of prolonged

requires the exercise of judgment by management. Factors which are taken into consideration include the amount of

decrease in the cost as a percentage or the impaired value as well as the net positions of the entities.

Bonds available for sale are impaired when there is objective evidence of impairment due to one or more events

occurred after the initial recognition of the investment and the loss making event (or events) which affects the expected

future cash flows of the investment. The determination of impairment requires the exercise of judgment by

management. An individual assessment for impairment on bonds is performed, of which the fair value on the

statement of financial position has been significantly reduced and the issuer has been downgraded.

3.4 Impairment of investments held to maturity

Investments in government securities are assessed for impairment, considering the credit ability as reflected on the

returns of the bonds, in the evaluations of rating agencies, the ability of the state to obtain funding from the markets,

and whether the state has resorted to support mechanisms for financial support.

Investments in securities held to maturity are impaired when their carrying value exceeds their recoverable amount.

The recoverable amount is determined based on the present value of the expected cash flows. For the determination

of the expected cash flows significant judgments and estimates are required, that are related to the financial position

of the issuer, the breach of the terms of the contracts and the possibility of bankruptcy of the issuer.



27


3.5 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 are 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 and

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.

3.6 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 Group recognises

liabilities for anticipated tax 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.

3.7 Provision for obsolete and slow-moving inventories

The Group 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.

3.8 Fair value on investment properties and properties held for sale

The fair value of investment properties and properties held for sale, is determined based on reports issued from

independent professional surveyors, who are specialised in the property sector. Investment properties and properties

held for sale are revalued at the end of each reporting period.

3.9 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 are being 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.



28


3.10 Retirement benefits

During 31 December 2013, certain CCIs were offering defined benefit retirement plans. These benefits were

terminated during the beginning of 2014. In relation to the defined contribution plan for 2014, the current contribution

by the employer amounts to 7% for the Bank while the contribution for the CCI’s amounts to 5%. The equivalent

contribution by the employee amounts to 3-10% for the Bank and 3-12% for the CCIs.

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.

3.11 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.

3.12 Cooperative Sector Restructuring Plan

During September 2013, General Meetings of the Members of the 93 CCI’s were held in which mergers were

approved, as provided in the Restructuring Plan, and therefore reducing the number of CCIs to 18.

On 27 September 2013 the European Stability Mechanism announced the deposit of €1.5 billion 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 CCB increases by €1.5 billion 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

with a duration of 18 months that will be exchanged at its maturity date with cash.

According to the amended decree which was published in the official gazette 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 was 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 of CCB equals to one euro and twenty eight cents (€1,28) per share, while according to the decree specific

deductions were made to the payroll of the Group.

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 28 February 2014, a Subscription Agreement between the Ministry of Finance, Cooperative Central Bank and

European Stability Mechanism was signed for the deposit of €1,5 billion for the recapitalization of the Cooperative

Sector and the transfer of its shares to the State.



29


3.12 Cooperative Sector Restructuring Plan (continued)

On 24 March 2014 all merger procedures were 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

Introduction of a Non-Performing Loans Division aiming quality improvement of the portfolio of loans and

other advances

Strengthening of Capital Adequacy

Strengthening the operational framework of Corporate Governance

Downsizing branch network

Strengthening of internal audit function and Risk Management framework

Divestment of the trading activities of the Cooperative Credit Sector

At the end of March 2014 the procedure for recapitalization of CCIs has been completed following the issue of share

capital to CCB. As a result, CCB is now the main shareholder by 99% to each CCI.

3.13 Macro-economic environment in Cyprus

The recession of Cyprus economy has, in accordance with the Statistical Service, reached 2,3% in 2014. The shrinking

trend of the economy is smaller than what the lenders were expecting, who were estimating that the total recession for

the year would have reached 4,5%. According to the Cyprus Statistical Service, despite the adverse macro-economic

environment, the public sector balance for 2014 recorded a deficit of €44 million or 0,3% of GDP compared to €844

million for 2013 or 4,66%. The improvement in public sector balance has exceeded the estimates that this year’s

deficit would reach 2,5% of GDP.

According to the estimates of the European Commission for Cyprus, which were announced in February 2015, the

cyprus economy is stabilising, but is also required to manage non-performing loans as well as the effects of the

expected decrease of the tourists from Russia, which are considered by the European Commission as the main risks

that stand before Cyprus. According to the predictions, the GDP of Cyprus will gradually rise during 2015 and 2016

by 0,4% and 1,6% respectively. The government deficit in 2015 will be -3%, while in 2016 it is expected to be

contained to 1,4%. Public debt is expected to reach 107,5% for 2014, to climb to 115,2% in 2015 and decrease to

111,6% of GDP in 2016. Unemployment rate has reached 16,1% of the working population for 2014, while it is

estimated that it will reach 15,8% in 2015 and 14,8% in 2016.

On 30 April 2014 the Ministry of Finance announced the issuance of, through private placement, a European

Government Bonds amounting to €100 million with duration of 6 years and nominal interest at 6,50%. On 18 June

2014 the Republic of Cyprus returned to markets by issuing a €750 million debt. The nominal value was set at 4,70%

while the return reached 4,850%. In March 2015 the return of the decennial Cypriot bond fell below 4% which was

the lowest of the last four-year period.

On 24 October 2014 Standard and Poor’s has upgraded the Cyprus Economy, stating the commitment of the

Government to the adjusting program and highlighting the significant fiscal improvement incurred recently, while the

next day Fitch also revised the outlook for Cyprus to positive, affirming long-term foreign and local currency to B-.

On 15 November 2014 Moody’s revised the rating of national bonds of Cyprus from Caa3 to B3 changing the outlook

from positive to stable.

According to the latest figures announced by CBC there was another increase in the deposits in January 2015 for third

consecutive month, reflecting the gradual improvement of the financial system. According to the information provided

by CBC, deposits were increased by €395,4 million during the first month of 2015 reaching €46,5 billion compared

to €46,1 billion in December 2014 and €46,9 billion in January 2014. By adjusting these figures to reflect the exchange

rates, it is identified that the deposits have decreased by €293,4 million compared to the increase in December of

€138,1 million.



30


3.13 Macro-economic environment in Cyprus (continued)

During 2015 the Cypriot economy is expected to face the following challenges:

1 Sustaining a path of the economy within the financial targets, especially in relation to public sector balance, the

development of the GDP and national debt, in order to create the prospects for successfully completing the

memorandum by the beginning of 2016 as foreseen in the agreement with the international lenders.

Raising of capital from the markets and the preparation for maintaining the financial targets for 2017 (primary

surplus 2,5% of GDP) and 2018 (primary surplus 4% of GDP) are included within the context of the

memorandum.

2 Manage negative consequences in the tourist sector and the sector of professional services from the development

of the Russian economy, the sanctions imposed on Russia and the devaluation of the Rubble.

3 The Cypriot economy is extrovert and is affected by others in the European and the global economy. For instance,

the relationship with the Greek economy, which is not so clear, must be assessed on how it will impact Cyprus

right now as a member state of the Eurozone and how we could be affected by a potential and prolonged economic

and political uncertainty in Greece.

4 According to the Memorandum of Understanding, 2015 is expected to be a significant year in terms of the required

adjustments. Until today the financial measures that have been implemented seem to be effective, however the

greatest issue for the new year is to form the prospects which will enable the implementation of reforms. In

addition to the financial sector, the General Health Care Scheme, the privatizations, the restructuring of the public

sector and the change in the taxation of the immovable properties are a few of such relevance.

5 Additionally, significant challenges for 2015 include management of non-performing loans and granting of new

advances to enterprises which are solvent. From 17 April, and after successive delays, the implementation of

foreclosure law has begun and the insolvency framework has been enacted. This framework also includes the

issue of revised code for restructuring of loans from CBC, as well as the disposal of loan portfolios. With the

private debt representing 3,5 times the country’s GDP, the need for deleveraging is increasing, which will create

difficulties in granting new advances. The improvement in the financial institutions ratios will enable the scaling

down of the lending rates. It is noted that the obligations for the systemic banking institutions of the Eurozone are

increasing, as they are under the supervision of the Single Supervisory Mechanism since November.

3.14 Regulatory Capital ratios

During the year ended 31 of December 2014, the Group has managed to return to profitability, in contrast to 2013

when it 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 in 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 capital adequacy ratios of the Group as at 31 of December 2014 (Total Capital, Tier 1 Capital and Common

Equity Tier 1 Capital) amounted to 13,56% (during 2013 the Capital Adequacy Ratios for the Cooperative Sector

amounted to 13,60%) according to the New Legislation and the Directive of ECB in relation to the minimum capital

requirements for the financial institutions (Capital Requirement Regulation (CRR)/Capital Requirement Directive

(CRD IV)), dated 26 June 2013 which was entered into force from 1 January 2014 and the relevant circulars issued

from CBC, based on Pillar 1.

After its recapitalization, the Group complies with the minimum level for Common equity Tier 1 capital. The Group

targets to maintain its capital adequacy ratios by not distributing profits, while simultaneously restructuring and

disposing its non-core assets will be determined based on reducing the associated risk and considering its capital

adequacy position.



31


3.15 Liquidity

Customer deposits decreased by 8% compared to December 2013, reaching €12.392.608 thousands (December 2013:

€13.477.149 thousands) and comprise of deposits in Euro amounting to €12.362.835 thousands (December 2013:

€13.417.755 thousands) and deposits in foreign currencies amounting to €29.773 thousands (December 2013: €59.394

thousands).

The total of the Group’s cash and deposits with banking institutions as at 31 December 2014 have decreased by

€547.221 thousands and reached €577.024 thousands (2013: €1.124.245 thousands).

The Management and Committee of CCB 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. As

at 31 December 2014, the Group has not used the ECB’s liquidity support mechanisms.

The Cooperative Central Bank is allowed to use liquidity facilities from the Eurosystem up to €2,012 billion

(according to the 31 December 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.

3.16 Profitability

The situation of the Cypriot economy and the macroeconomic environment, affects the profitability of the Group. In

2014, the percentage of the recession was 2,3%, 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 rise 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.

3.17 Stress Test

As part of the formation of a European Banking Union and more specifically of a Joint Supervisory Mechanism, stress

tests took place, aiming at the assessment 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. The first step for these stress tests, was an Asset Quality Review (AQR).

The tests were imposed amongst others on the Bank of Cyprus, the Cooperative Central Bank, the Hellenic Bank and

the RCB and aimed to secure the consistency and comparability of the results of all banks based on a common

methodology and scenario.

The Comprehensive Assessment of 130 systematic European banks was conducted by ECB in close cooperation with

the European Banking Authority (EBA).

As far as the lowest threshold of capital is concerned, the base scenario corresponded to 8% for the Common Equity

Tier 1 Capital, while the adverse scenario 5,5%. At the same time, apart from the common set of risks, the relevant

authorities in each country had the ability to perform scenarios and implement assumptions to risks relating to the

peculiarities of each country. The Pan-European stress tests results were announced on 26 October 2014.

The Comprehensive Assessment effected in a thorough review of the balance sheet of the bigger banks before ECB

undertakes its supervisory duties according to the Single Supervisory Mechanism (SSM) in November 2014.



32


3.17 Stress Test (continued)

ECB through the results that were announced, it incorporates the findings of the AQR into the stress tests, something

that has not been done in prior European stress tests.

The results of the AQR were used for adapting the starting point of the stress tests.

According to the AQR conducted by ECB, the predictions for the total assets of Cooperative Sector on 31/12/2013

was perfectly sufficient and so there was no need for additional provisions.

The basic findings from the Comprehensive Assessment for the Cooperative Sector as announced by the ECB are

presented below:

Figures prior to recapitalization

(31/12/2013)

Adjusted figures after

recapitalization of €1,5 billion

(March 2014)

Total equity on 01/01/2014

(CRDIV/CRR definition) € million -321 1.178

Core Tier 1 Capital Ratio on

31/12/2013 -3,70% 13,59%

Adjusted Core Tier 1 Capital Ratio

according to the findings of AQR -3,71% 13,58%


according to the base scenario

(lowest level for a three-year

period)

-3,24% 14,07%


according to the adverse scenario


period)

-7,99% 9,32%

Total capital requirements/ capital

surplus according to AQR and

Stress Test based on base scenario


period) € million

-974 526

Total capital requirements/ capital

surplus according to AQR and

Stress Test based on adverse

scenario (lowest level for a three-

year period) € million

-1.169 331

According to the adjusted figures after recapitalization, Core Tier 1 Capital Ratio of Cooperative Sector reached, in

base scenario, 14,1% (lowest level for a three-year period, with minimum limit of 8%), having capital surplus

amounting to €526 million or 6,1%. In the adverse scenario Core Tier 1 Capital Ratio of Cooperative Sector reached

9,3% (lowest level for a three-year period, with minimum limit of 5,5%) and capital surplus amounting to €331 million

or 3,8%.

3.18 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 as a result, what effect, if any, they could have on the future financial

performance, cash flows, financial position and capital of the Group. Despite the significant improvement of the Group

and all of the positive results from the adverse scenario of the stress tests imposed by ECB, they continue to 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.



33


3.18 Uncertainties (continued)

The ability of the Group to continue as a going concern depends on:

The progress of the Cypriot economy, the progress in property prices in Cyprus and the ability of borrowers to

repay their debt obligations.

The configuration of the international economic 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 to maintain and enhance the liquidity and the availability of liquidity provision mechanisms

via the Central Bank.

The requirements of the supervisory framework in relation to the capital adequacy.

3.19 Evaluation of going concern

The Management and Committee of the Bank, having taken into consideration the above factors and measures taken

for the support of the Cypriot economy and the implemented and planned actions as they are presented in detail in the

Restructuring Plan, were satisfied that the Group has the means of continuing its operations in the foreseeable future

and as such the consolidated financial statements will continue to be prepared on the basis of the going concern

principle for the following reasons:

The Group has been successfully recapitalized, 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 Group

maintains access to alternative sources of raising funds.

4. Adoption of new and revised International Financial Reporting Standards and Interpretations

From 1 January 2014, the Group adopted all the changes in International Financial Reporting Standards and

Interpretations as adopted by the European Union and that are relevant to its operations. This adoption did not have

a material effect on the consolidated financial statements of the Group.



34

4. Adoption of new and revised International Financial Reporting Standards and Interpretations (continued)

The following Standards, Amendments of Standards and Interpretations have been issued but have not yet effective

for annual periods beginning on 1 January 2014. Those associated with the operations of the Group are presented

below. The Group does not intend to adopt the following prior to their effective date.

(i) Standards and Interpretations adopted by the European Union

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 depend 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 in its consolidated 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 consolidated

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 consolidated

financial statements.

(ii) Standards and Interpretations not yet adopted by the EU

IFRS 14 "Regulatory Deferral Accounts" (effective for annual periods beginning on or after 1 January 2016).

IFRS 14 permits an entity which adopts for the first time the International Financial Reporting Standards to continue

to use, with some LTD 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 in its consolidated financial statements.

Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception

(effective for annual periods beginning on or after 1 January 2016).

In December 2014, the IASB issued narrow-scope amendments to IFRS 10, IFRS 12 and IAS 28. These amendments

introduce clarifications to the requirements when accounting for investment entities, while they provide relief in

particular circumstances, which will reduce the costs of applying the standards. The Group is currently evaluating the

impact of this standard in its consolidated statements.

IFRS 11 (Amendment), "Accounting for the acquisition of interests in Joint Ventures" (effective for annual

periods beginning on or after 1 January 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 Group is currently evaluating the impact of this standard in its consolidated financial statements.



35


(ii) Standards and Interpretations not yet adopted by the EU (continued)

Amendments to IAS 1: Disclosure Initiative (effective for annual periods beginning on or after 1 January 2016).

These amendments aim to resolve issues relating to the existing presentation and disclosure requirements and ensure

the ability to carry judgement by the entities in preparing the financial statements. The Group is currently evaluating

the impact of the standard in its consolidated financial statements.

Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or

Joint Venture (effective for annual periods beginning on or after 1 January 2016).

The amendments aim to address an acknowledged inconsistency between the requirements in IFRS 10 and those in

IAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The

main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business

(either as a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not

constitute a business, even if these assets are considered a subsidiary. The Group is currently evaluating the impact of

the standard in its financial statements.

IAS 27 (Amendments) ''Equity method in separate financial statements'' (effective for annual periods

beginning on or after 1 January 2016).

The amendments allow entities to account for their investments in subsidiaries, joint ventures and associates under

the equity method in their separate financial statements, which was not valid prior to this amendment. The Group is

currently evaluation the impact of the standard in its consolidated financial statements.

IAS 16 and IAS 41 (Amendments) ''Bearer plants'' (effective for annual periods beginning on or after 1

January 2016).

In June 2014, the IASB issued amendments regarding the changes in the financial recognition of bearer plants. Based

on the amendments, it was decided that bearer plants, used exclusively for production growth should be accounted for

in the same way as property, plant and equipment (IAS 16). Consequently, these amendments bring bearer plants

under the scope of IAS 16 instead of IAS 41. The production growth from the use of these bearer plants remains under

the scope of IAS 41. The Group does not expect that the adoption of these amendments in future periods will have a

material effect in the consolidated financial statements of the Group.

Explanation of acceptable methods of depreciation and amortization - Amendments to IAS 16 and IAS 38

(effective for annual periods beginning on or after 1 January 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 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. The

Group 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.

Annual Improvements to IFRSs 2012–2014 Cycle (effective for annual periods beginning on or after 1 January

2016).

Annual Improvements to IFRSs 2012–2014 Cycle is a collection of amendments to four standards and is considered

part of the program of the annual improvements to standards. The amendments are effective for accounting periods

beginning on or after 1 January 2016, even though the companies are allowed early adoption. The issues addressed in

this cycle include the following: IFRS 5 Changes in methods of disposal, IFRS 7 Servicing contracts and applicability

of the amendments to IFRS 7 to condensed interim financial statements, IAS 19 Discount rate and IAS 34 Disclosure

of information in the interim financial report. The Group is currently evaluating the impact of the standard in its

consolidated financial statements.



36


(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 1

January 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 single model applicable to contracts with

customers and two approaches to the recognition of revenue: at one point in time or over time. Extensive disclosures,

are required, including analysis of total revenues, information on yield obligations, changes in balances of assets

which are bound by a contract and any contract obligations between period and key judgments and estimates. The

Group is currently evaluating the impact of the standard in its consolidated 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 the

entity’s financial model manages these instruments and the contractual cash flow characteristics. 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 in its consolidated financial statements.

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.

5. 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.

5.1 Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Bank and its entities controlled by

the Bank (its subsidiaries). Control is achieved where the Bank has the power to govern the financial and operating

policies of an entity so as to obtain benefits from its activities. The results of its subsidiaries are included in the

consolidated statement of profit or loss and other comprehensive income from the date that the control was effective

until the date the control ceases.

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. Total comprehensive income of subsidiaries is attributed to the owners of the Bank and to the non-controlling

interest even if this results in the non-controlling interests having a deficit in balance.

Non-controlling interest represent equity of subsidiaries that are not related directly or indirectly with the Bank and

of which the Group has not agreed any extra term with the non-controlling interest which create to the Group as a

total a significant obligation which give rise to a financial liability. In every merge, the Group may choose to measure

the non-controlling interest either at fair value or at the proportionate amount of the net identifiable assets of the

subsidiary.

Non-controlling interest are classified under equity in the consolidated statement of financial position, separately from

equity of the Bank’s shareholders. Non-controlling interest are presented in the statement of profit or loss and other

comprehensive income as allocation of the total profit or loss for the year, between the non-controlling interest and

the Bank’s shareholders.



37

5. Significant accounting policies (continued)

5.1 Basis of Consolidation (continued)

Changes in shareholding interests of a subsidiary of the Group that do not result in loss of control are considered as

transactions of equity and the relevant adjustments are being made in relation to the shareholders of the Bank and

non-controlling interest, in the consolidated statement of changes in equity, so as to reflect the change in ownership,

but there are no adjustments in the amount of goodwill and no profit or loss is recognized.

When the Group has lost the control over a subsidiary, this is considered as disposal of the shares and as a result the

profit or loss is recognized in the results. Any interest recognized in the subsidiary during the day of the loss of control,

is recognized at fair value and this amount is considered at fair value from the beginning of recognizing the financial

asset.

Balances and transactions which are eliminated during consolidation

Balances and transactions with companies of the Group as well as non-realised profits or losses incurred from

transactions between them, are eliminated during the preparation of the consolidated financial statements. Non-

realised losses incurred from transactions between companies of the Group are eliminated in the same way as non-

realised profits, but only to the degree that there is no evidence for impairment in value.

5.2 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.

5.2.1 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 (or “pooling of interests”). 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 Bank.

The merger reserve is created from the difference between the share capital of the 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 the 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 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.

5.3 Turnover

The Group’s turnover includes interest income, income from fees and commissions, net income or loss from disposal

and revaluation of exchange rates and financial instruments and other income.



38


5.4 Interest income and expense

Interest income and expense are recognized in profit or loss using the effective interest method, whenever possible,

or otherwise the contractual rate is used. 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.

5.5 Fee and commission income and expenses

Fee and commission income related to loans and other advances to customers are recognized in profit or loss using

the effective interest method, whenever possible, or otherwise the contractual rate is used. The fee and commission

expense and the remaining fee and commission income are recognized on an accrual basis in the period that the

services occurred.

5.6 Income from hire purchase and leasing

Income from hire purchase and leasing are recognized in the statement of profit or loss and other comprehensive

income and are measured on a systematic basis in proportion to the amounts due so that the return on investment be

constant.

Debtors of hire purchase and leasing are included in the consolidated statement of financial position under loans and

other advances to customers after deducting the commission attributable for future installments.

5.7 Rental income

Rental income is recognized on an accrual basis in a straight line method over the life of the lease.

5.8 Income from investments in securities

Dividend income 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.

5.9 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 has no 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 lower 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 of

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.



39


5.9 Investments in associates (continued)

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 recognized at the date of acquisition is recognized 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 recognized

immediately in profit or loss.

The requirements of IAS 39 are applied to determine whether it is necessary to recognize 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 recognized forms part of the carrying value of the investment. Any reversal of that impairment loss

is recognized 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 recognized in the Group's consolidated financial statements only to the extent that these transactions are not related

to the Group.

5.10 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.

5.11 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.

The Committee monitors the results of the operating segments of the Group separately for decision-making purposes

in relation to the allocation of resources to operating segments and the assessment of their performance. The

performance of the operating segments is assess based on operating profit or loss before taxation which is measured

as in the consolidated financial statements.

For each reporting segment, interest income is presented net of interest expense, as the majority of income derives

from interest and the chief operating decision maker depends mostly on net interest income for the assessment of

performance of each segment and the allocation of resources to each segment.

The results of the segments, both in financial and trading sector, are assessed based on financial performance indexes

performance such as total income and expenses, percentage of expenses on income, return on assets and on capital

and provisions for impairment.



40


5.12 Retirement benefit costs

The Group and its 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 staff costs. The Group does not have any legal

or constructive obligation 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.

5.13 Taxation

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it

relates to items recognized 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.

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 and laws 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.

5.14 Special Levy

According to the “Special Levy on Credit Institutions Law of 2011”, approved on 14 April 2011, a special levy on

credit institutions, for the years 2011 and 2012, 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 increased rate to the special levy of 0,15%. Based on the 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.

Since 1 January 2014, special levy of 0,15% is imposed on qualifying deposits at 31 December of the previous year.



41


5.14 Special Levy (continued)

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.

5.15 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 presented

in the consolidated financial statement 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 under construction for production, rental or administrative purposes, or for purposes not yet determined,

are carried at cost less any recognized impairment loss. Cost includes professional fees and, for qualifying assets,

borrowing costs capitalized 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.

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.



42


5.15 Property, plant and equipment (continued)

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 derecognized 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 withdrawal 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 recognized in profit or loss. When revalued assets are sold, the amounts included in the fair value

reserves are transferred to retained earnings.

5.16 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 recognized at cost in the

consolidated statement of financial position 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.

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 derecognized 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 derecognized.

5.17 Properties acquired in satisfaction of debt

Properties acquired in satisfaction of debt are measured at the lower of cost and net selling price.

5.18 Non-current assets held for sale

The Group classifies non-current assets held for sale, when their carrying value will be recovered mainly through a

sale transaction and not from their continued use. The above requirement is met only when the sale is highly probable

and the asset is available for immediate disposal in its current condition. The Committee should be committed to a

sale plan and the sale is expected to meet the conditions of a complete sale within a year from the year of classification.

Non-current assets held for sale are measured at the lower of carrying value and fair value less costs to sell. The

impairment losses from initial recognition and the gain or loss from subsequent measurements are recognized in the

statement of profit or loss and other comprehensive income. Non-current assets held for sale are not depreciated.



43


5.19 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 recognized as intangible assets.

Subsequently computer software is carried at cost less accumulated amortization and accumulated impairment losses.

Expenditure which enhances or extends the performance of computer software programs beyond their original

specifications is recognized as a capital improvement and added to the original cost of the computer software.

Expenditure associated with maintenance of computer software programs is recognized as an expense when incurred.

Computer software is amortized using the straight-line method over their useful lives, not exceeding a period of five

years. Amortization 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 derecognized 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 recognized in profit or loss when the asset is derecognized.

5.20 Revaluation Reserve

Any surplus from revaluation of land and buildings is credited to the revaluation reserve which is included under

equity. In cases where, after revaluation, depreciation charged increased, then an amount equals to this increase (after

deferred tax) transfers every year from revaluation reserve to retained earnings. At disposal of land and buildings, the

relevant cumulative surplus included in revaluation reserve is also transferred to retained earnings.

5.21 Deferred income

Deferred income represents income receipts which relate to future periods.

5.22 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.

5.23 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.



44


5.24 Financial Instruments

5.24.1 Recognition

The Group initially recognises loans and other advances to customers, 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.

5.24.2 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 .If there is not a realistic

perspective on the impaired amount of loans and accumulated provisions it will be derecognised , either fully or

partially. When loans are secured, the amount that is derecognized is after the proceeds received from the liquidation

of the collateral. In case that, the net realizable value of the mortgage has been determined and no realistic prospective

of a payment over this amount is established, the derecognition can be completed at an earlier stage.

The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire.

.

5.24.3 Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the consolidated 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 realize 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.

5.24.4 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, less any principal repayments, plus or less the cumulative amortisation

using the effective interest method of any difference between the initial amount recognised and the maturity amount,

less any reduction for impairment.



45


5.24 Financial Instruments (continued)

5.24.5 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.

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.

Fair value is the amount for which an asset can be exchanged or a liability can be settled between knowledgeable

willing parties in an arm’s length transaction on the measurement date.

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

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.



46



5.24.5 Fair value measurement (continued)

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. 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.

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.

5.24.6 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 subsequently

measured at amortised cost using the effective interest rate method, less any provision for impairment.

5.24.7 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.

5.24.8 Investments

The Group classified its financial assets that comprise of investments in the following four categories. The financial

assets are classified in the below 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.



47



5.24.8 Investments (continued)

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 which are not close to their maturity

date 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. However, any disposal or reclassification under the conditions that will be set below, will not cause a

reclassification of the whole category:

Disposals or reclassifications that are so close to the maturity date that the change of the market interest will not

have a substantial impact on the fair value of financial assets.

Disposals or reclassifications that realized after the Group has recover the whole initial value.

Disposals or reclassifications that are a result of non-recurring, isolated events, beyond the control of the Group

which could not be reasonably expected.

(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 and

(b) Assets designated at fair value through profit or loss at initial recognition

Changes in the fair value of the assets that are designated as assets at fair value through profit or loss 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 of 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 Institution to a third

party who is not already a member of the Cooperative Credit Institution and the transfer of shares between members

cannot be completed unless there is an approval of the Committee of the Cooperative Credit Institution. In addition,

each member-shareholder of a Cooperative Credit Institution holds only one vote irrespective of the number of shares

held. Due to the above limitations, the fair value cannot be estimated reliably and therefore the investments are

presented at cost.

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.

5.24.9 Deposits and other customer accounts

After initial recognition, deposits and other customer accounts 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.



48



5.24.10 Cash and cash equivalents

Cash and cash equivalents comprise of cash and unrestricted deposits to central banks, investments in debt securities,

deposits and amounts due to other banks, as well as repurchase agreements, of which the maturity does not exceed

the period of three months from the acquisition date.

Cash and cash equivalents are recognized in the consolidated statement of financial position at amortised cost.

5.24.11 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.

5.25 Impairment

5.25.1 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.



49


5.25 Impairment (continued)

5.25.1 Financial assets (continued)

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 and 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.

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.

5.25.2 Non financial assets

The carrying amounts of 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.

5.26 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 repayment is virtually certain.

5.27 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.



50


5.28 Repurchase agreements

Securities sold subject to repurchase agreements (‘repos’) continue to be recognised in the consolidated 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.

5.29 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 trading terms and the value of the premium agreed corresponds to the value of the guarantee

obligation, the fair value of a financial guarantee is initially zero.

Subsequent to initial recognition, the Bank’s liabilities under such guarantees are measured at the higher of the initial

amount, less cumulative amortization of fees, which are recognized 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.

5.30 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.

5.31 Share capital

Shares issued and fully paid are recognized at nominal value and are classified as share capital which is included in

equity.

When subsidiaries of the Group acquire shares of the parent company, the fair value of these shares is included in

retained earnings in equity. Any gain or loss arising from their disposal is included in equity.

Expenses directly related to an increase of the authorized share capital and issued share capital are recognized directly

in equity during the year they occurred.

5.32 Earnings per Share

The Group presents basic and diluted earnings per share attributable to the right holders. Basic earnings per share is

calculated based on earnings attributable to right holders and the weighted average number of issued shares throughout

the year. The diluted earnings per share is calculated after adjusting earnings attributable to right holders and the

number of issued shares throughout the year.

5.33 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 recognized as a liability in the year in which they are

approved by the Committee of the Bank. Final dividends are recognized in the year in which they are approved by the

members of the Bank.



51


5.34 Transactions between related parties

Parties are considered as related when one party has the ability to control the other party or has significant influence

on the financial and operational decisions of the other party. Related party transactions are considered the transfer of

resources or obligations between related parties, irrespective of whether a price is charged.

5.35 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 consolidated 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.



52

6. Segmental analysis

Banking, financial and

insurance services

Trading

activities

Transactions

between

segments Total

€'000 €'000 €'000 €'000

2014

Net interest income/(expense) 378.963 (70) (1) 378.892

Net fees and commission income/(expense) 25.752 (59) - 25.693

Other (losses) / income (24.061) 24.497 (12.385) (11.949)

Total net income 380.654 24.368 (12.386) 392.636

Staff costs (113.965) (7.490) - (121.455)

Depreciation (9.577) (2.874) - (12.451)

Other operating expenses (70.715) (7.478) 11.818 (66.375)

Total expenses (194.257) (17.842) 11.818 (200.281)

Operating profit before provisions for

impairment 186.397 6.526

(568)

192.355

Increase in provisions for impairment of loans and

other advances (166.050) -

-

(166.050)

Other expenses - (324) - (324)

Profit before tax 20.347 6.202 (568) 25.981

Banking, financial and

insurance services

Trading

activities Total

€'000 €'000 €'000

2013

Net interest income/(expense) 412.033 (303) 411.730

Net fees and commission income 34.717 94 34.811

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) (19.237) (64.105)

Total expenses (165.314) (38.209) (203.523)

Operating profit before provisions for

impairment 213.427 (17.999) 195.428

Charge for impairment in value of investments

held to maturity (16.900) - (16.900)

Increase in provisions for impairment of loans and

other advances (1.868.747) (49) (1.868.796)

Other expenses (4.226) - (4.226)

Loss before tax 1.676.446) (18.048) (1.694.494)



53

7. Interest income

2014 2013

€'000 €'000

Loans and other advances to clients 642.657 825.716

Deposits in Central Bank of Cyprus 569 1.060

Deposits in other bank institutions 357 1.886

Investments held to maturity 46.164 58.250

689.747 886.912

8. Interest expense

2014 2013

€'000 €'000

Customer deposits 309.001 472.396

Loans payable 791 1.042

Repurchase agreements 111 1.122

Bonds - 31

Amounts due to other banks 952 584

Loan Commissioners- Agricultural Development - 7

310.855 475.182

9. Other net losses

2014 2013

€'000 €'000

Net loss from disposal of property, plant and equipment (81) (77)

Net loss from disposal of properties held for sale (126) (42)

Net loss from disposal of investments held to maturity (470) -

Fair value gains on financial assets at fair value through profit or loss - 49

Fair value losses on investment properties (16.762) (32.734)

Fair value gains on available for sale financial assets transferred to profit or loss 888 -

Impairment charge on investment properties (1.346) (2.654)

Impairment charge on properties held for sale (4.067) (17.813)

Impairment charge on properties, plant and equipment (183) (7.867)

Impairment charge on intangible assets (39) -

Other losses (8.160) -

(30.346) (61.138)



54

10. Other income

2014 2013

€'000 €'000

Net income on trading in foreign currencies 1.749 854

Gross profit from trading sector 9.565 5.663

Government grants 25 40

Proceeds from trading sector debtors which were written off - 46

Rents receivable 4.090 4.411

Sundries 2.968 2.534

18.397 13.548

11. Staff costs

2014 2013

€'000 €'000

Wages and salaries 81.001 97.870

Social insurance costs and other Government funds 8.363 10.273

Other contributions 3.714 3.627

Special contribution 391 296

Provident fund contributions 3.502 9.221

Expenses for early retirement plan 24.006 1.420

Costs for defined retirement benefit plan (Notes 5.12 and 12) - 1.289

120.977 123.996

Other staff costs 478 1.637

121.455 125.633

Average number of employees at the end of the year (including Committee

Members in their executive capacity) 2.962 3.235

Reduction of CCS payroll

According to the Restructuring Plan, it was decided to reduce the payroll of the Cooperative Credit Sector by an

average of 15%. This reduction was achieved by a scaled reduction of the wages and by decreasing employer

contributions to the Provident Fund by 7% for CCB and by 5% for the CCIs. 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). 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 work agreements, 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 which are represented by the

Cooperative Central Bank Limited.



55

11. Staff costs (continued)

c) Voluntary Retirement Plan of CS:

Under the Restructuring Plan, there was an 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 February 2014 and expired on 31

December 2014. A total of 232 people from the Credit sector and 65 from the Trading Sector (297 individuals in

total) accepted the plan. The total cost of the plan amounted to €23.5 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.

12. Employee benefits

As at 31 December 2014 the Group was offering defined contribution pension plans in provident funds, which form

separate legal entities. The current employer’s contribution amounts to 7% for the Bank and 5% for the CCIs. The

respective contribution of the employee is 3-10% for the Bank and 3-12% for the CCIs.

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 ended 31 December 2013, an amount of €1.289 thousand was charged in respect

of staff benefits. The amount recognized is analyzed as follows:

2014 2013

€'000 €'000

Costs under defined benefit plans

- 1.159

Current service costs - 130

Compensation due to termination of employment - -

- 1.289

13. Depreciation

2014 2013

€'000 €'000

Property and equipment for own use (Note 26) 11.678 12.859

Intangible assets (Note 27) 773 926

12.451 13.785



56

14. Other operating expenses

2014 2013

€'000 €'000

Taxes and Licenses 1.711 1.093

Electricity 3.384 3.788

Cleaning and water supply 1.213 1.279

Insurance 1.845 2.073

Repairs and renovations 1.395 1.250

Telephone and postage 2.723 2.619

Stationery and printing 3.766 2.916

Maintenance of equipment 1.474 1.748

Audit fees 1.368 900

Other Directors remuneration 741 549

Other professional fees 5.378 2.753

Special levy on deposits 20.052 17.105

Remuneration of non-executive Committee members 663 662

Transportation costs 1.225 1.813

Advertising 1.588 5.109

Rent 1.115 1.546

Security expenses 983 1.034

Professional subscriptions 473 549

Valuation expenses for clients and company 1.871 121

Other expenses 13.407 15.198

66.375 64.105

15. Tax

15.1 Tax recognized in profit or loss for the year

2014 2013

€'000 €'000

Corporation tax-current year 2.283 3.207

Prior years corporation tax 96 1.395

Defence contribution-current year 332 372

Defence contribution- previous year 16 -

Capital gains tax - -

Deferred tax - credit (Note 39) (17.948) (1.775)

Share of tax of associates (Note 29) 1 1

(15.220) 3.200



57

15. Tax (continued)

15.1 Tax recognized in profit or loss for the year (continued)

The tax on the Group's results, before tax, differs from the theoretical amount that would arise using the applicable

tax rates as follows:

2014 2013

€'000 €'000

Profit/(loss) before taxation 25.981 (1.694.494)

12.5% 12.5%

Corporation tax rate

Tax calculated at the applicable tax rates 3.248 (211.812)

Tax effect of the loss from transactions with members not subject to tax 22.873 92.723

Tax effect of expenses not deductible for tax purposes 4.510 72.314

Tax effect of allowances and income not subject to tax (30.774) (7.931)

Tax effect of losses brought forward (790) 7

Tax effect of loss for the year 3.197 55.048

10% additional charge 19 7

Defence contribution- current year 332 372

Defence contribution- previous years 16 -

Capital gains tax - -

Deferred tax (17.948) (1.775)

Prior year taxes 96 1.395

Other taxes 1 2.852

(15.220) 3.200

15.2 Tax recognized in other comprehensive income

2014 2013

€'000 €'000

Revaluation of land and building (Note 39) 1.845 (356)

1.845 (356)

The corporation tax rate is 12,5%. The Group is subject to tax on income arising from transactions with non-members.

In accordance with article 13 of the Income Tax Law 118(I)/02, any tax losses of the Group companies in Cyprus

which are not offset against taxable profits of other Group companies in Cyprus, are carried forward and offset against

future taxable profits. Based on an amendment to the Income Tax Law issued on 21 December 2012, tax losses for

the years from 2006 onwards, can be carried forward and set off only against taxable profits for the next five years.

Based on International Accounting Standard 12, the Group has recognized a deferred tax asset amounting to €15.807

thousand that arises from tax losses brought forward from 2013. The recognition of the deferred tax asset is based on

the profitability forecasts which were prepared by the Bank’s management in 2014, and which indicate that it is

probable that profitability forecasts which were prepared by the future taxable profits will arise in the Group, against

which the deferred tax asset may be used.

Rents received by the Group are subject to defence contribution at the rate of 3%.



58

16. Earnings per share

Basic and diluted earnings per share:

The calculation of basic and diluted earnings per share is based on the profit attributable to majority right holders, the

weighted average number of issued shares and the weighted average number of issued shares during the year as follows:

2014 2013

Profit/ (loss) attributable to shareholders (€thousands) 40.688 (1.697.694)

Weighted average number of shares in issue during the year (thousands) 988.370 11.807

Basic profit/(loss) per share (cent) 4,12 (14.378,71)

Adjusted weighted average number of shares (thousands) 988.370 11.807

Diluted earnings per share (cent) 4,12 (14.378,71)

At 31 December 2014 and 2013, the diluted profit/(loss) per share is the same with the basic earnings per share because

there were no issued warrants or other convertible into shares.

17. Deposits with central banks

Deposits with the Central Bank of Cyprus include deposits for liquidity purposes or/and additional placements for

surplus available funds and are presented below:

2014 2013

€'000 €'000

Deposits with Central Bank of Cyprus 417.533 959.250

Accrued interest 4 25

417.537 959.275

2014 2013

Repayment analysis: €'000 €'000

Compulsory deposits 115.997 149.250

Within three months (Note 42) 301.540 810.025

417.537 959.275

The exposure of the Group to credit risk and impairment losses in relation to the above mentioned deposits are reported

in note 46.1 of the consolidated financial statements.



59

18. Deposits with other banking institutions

The deposits with other banking institutions comprise deposits of available funds and are presented below:

2014 2013

€'000 €'000

Deposits with cypriot banks 9.136 5.486

Deposits with banks abroad 34.013 56.648

Other cash equivalents 110 1.960

43.259 64.094

Accrued interest 100 39

43.359 64.133

2014 2013


On demand (Note 42) 2.872 4.377

Within three months (Note 42) 31.751 54.462

Between three months and one year 8.736 5.294

43.359 64.133

On 31 December 2014 placements with other banks amounting to €6.351 thousand (2013: €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 46.1 of the consolidated financial statements.

19. Loans and other advances to customers

2014 2013

€'000 €'000

Loans 12.982.864 13.251.846

Loans to companies under liquidation 49.964 49.966

Loans for the repayment of refugee deposits 36.534 36.534

Long term advances for agricultural development 21.533 21.385

13.090.895 13.359.731

Accrued interest 4.328 4.024

13.095.223 13.363.755

Provisions for impairment (2.968.495) (2.585.615)

10.126.728 10.778.140

2014 2013

€'000 €'000

Analysis of loans by category:

Current accounts 1.495.469 1.185.521

Loans 11.467.446 12.040.744

Other debtors 19.949 25.581

12.982.864 13.251.846



60

19. Loans and other advances to customers (continued)

Provisions for impairment Individual and

collective

provision for

doubtful debts IBNR Total

€'000 €'000 €'000

Balance -1 January 2013 673.151 866 674.017

Interest of Impaired loans 100.133 - 100.133

Unwinding of discount (52.451) - (52.451)

Provisions for the year 1.258.642 610.154 1.868.796

Write offs (4.880) - (4.880)

At 1 January 2014 1.974.595 611.020 2.585.615

Interest of Impaired loans 444.649 - 444.649

Unwinding of discount (224.479) - (224.479)

Provisions for the year 443.409 (227.359) 166.050

Write offs (3.340) - (3.340)

At 31 December 2014 2.634.834 333.661 2.968.495

The provisions for impairment of loans to companies under liquidation as calculated by CCB amounts to €49.099

thousand (2013: €48.802 thousand).

2014 2013


On demand 2.415.713 2.069.211

Within three months 115.382 176.860

Between three months and one year 438.822 617.876

Between one to five years 1.772.518 2.947.949

Over five years 8.352.788 7.551.859

Provisions for impairment (2.968.495) (2.585.615)

10.126.728 10.778.140

The non-performing loans as at 31 December 2014 were €7.315.120 thousands (2013: €6.135.795 thousands)

representing 55.8% of the portfolio of loans and other advances to customers (2013: 46%). The comparative figures

of 2013 were estimated based on the definition described in the previous Directive, as stated below.

The analysis of non-performing loans is disclosed in note 48. The non-performing loans in note 48 are presented as

at 31 December 2014 in accordance with the definition of the European Banking Authority (EBA) while the amounts

as at 31 December 2013 are in accordance with the previous Directive on the definition of non performing and

restructured credit facilities of the Central Bank of Cyprus.

According to the definition of EBA, the following advances are considered as non-performing: 1) Important advances

that present past due balances more than ninety days, or 2) advances for which the clients cannot fully repay their

obligations without the sale of collateral, or 3) client advances for which the Bank took legal actions against them, or

advances of bankrupt clients, or advances for which the Bank has recognized a provision for impairment or write off,

or 4) advances that have been restructured twice in a period of two years, or 5) Advances that have been restructured

and during the monitoring period (2 years) present arrears for a period for more than 30 days.



61

19. Loans and other advances to customers (continued)

According to the previous Directive on the definition of non performing and restructured credit facilities of Central

Bank of Cyprus, 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 a period of 18 months (with the exception of loans and other advances fully secured

with cash).

The exposure of the Group to credit risk in relation to loans and other advances to customers is reported in note 46.1

of the consolidated financial statements.

Advances with terms that were renegotiated and forbearance policy

The net advances with terms that were renegotiated are analyzed below by sector:

2014 2013

€'000 €'000

Trading sector 145.244 43.168

Construction and Real Estate entities 1.538.077 97.968

Manufacturing entities 41.147 23.730

Tourism entities 173.921 13.799

Other entities 18.476 56.290

Private sector 62.218 1.314.196

Total 1.979.083 1.549.151

2014 2013

Analysis of loans by geographical segment: €'000 €'000

Cyprus 10.126.728 10.778.140

10.126.728 10.778.140

20. Inventories

2014 2013

€'000 €'000

Raw materials 4.223 2.401

Finished goods 10.246 7.091

Properties for development 23.014 24.360

Other inventories 1.500 10.824

38.983 44.676



62

21. Properties held for sale

2014 2013

€'000 €'000

On 1 January 83.321 59.253

Additions 33 17.784

Disposals (236) (215)

Transfer from investment properties 531 24.312

Impairment charge (4.067) (17.813)

At 31 December 79.582 83.321

Properties held for sale include properties acquired in satisfaction of debt amounting to €57.941 thousand (2013:

€54.811 thousand). During the year, the Group did not proceed with any significant disposals regarding properties

acquired in satisfaction of debt.

22. Financial assets at fair value through profit or loss

2014 2013

€'000 €'000

On 1 January 202 148

Additions - 5

Transfer to available for sale financial assets (202) -

Change in fair value - 49

At 31 December - 202

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 consolidated 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.

23. Available for sale financial assets

2014 2013

€'000 €'000

On 1 January 24.825 13.034

Additions 14.974 12.665

Disposals (11.140) -

Transfer from financial assets at fair value through profit or loss 202 -

Transfer from investments held to maturity 17.458 -

Net fair value gain on available for sale financial assets transferred to profit or loss 888 -

Impairment charge (327) (4.234)

Amount transferred to equity 690 3.360

At 31 December 47.570 24.825



63

23. Available for sale financial assets (continued)

Available for sale financial assets, which are principally comprised of bonds, 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:

2014 2013

€'000 €'000

Net gain on available for sale financial assets transferred to profit or loss 888 -

Impairment charge – available for sale financial assets (327) (4.234)

Net gain/(loss) from available for sale financial assets 561 (4.234)

24. Investments held to maturity

2014 2013

€'000 €'000

Government debt securities 889.283 982.001

Debt securities of European Stability Mechanism 1.500.000 -

Debt securities of Cypriot banks 888 888

Debt securities of foreign banks - 10.865

2.390.171 993.754

Accrued Interest 19.610 23.722

2.409.781 1.017.476

The movement for the year in securities held to maturity is presented below:

2014 2013

€'000 €'000

On 1 January 1.017.476 1.733.797

Additions 1.500.150 -

Disposals (90.387) (699.421)

Transfer to available for sale financial assets (17.458) -

Impairment charge - (16.900)

At 31 December 2.409.781 1.017.476

The Republic of Cyprus which is the issuer of the Government debt securities is assessed by the Credit Rating

Agencies as B3/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 the transfer, the Bank recognized impairment losses of €16.900 thousand.

Purchases and sales of held to maturity investments are recognized 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 amortized cost using the effective yield method.



64

24. Investments held to maturity (continued)

In 2013, CCB proceeded with the exchange of debt securities that were classified as financial assets held to maturity

with securities. During the year and during 2015, CCB proceeded with the sale of debt securities that were classified

as investments held to maturity. The securities that were exchanged in 2013 and the debt securities that were sold in

2015, were reclassified to financial assets available for sale. This transfer did not result to the transfer of the whole

category on the grounds that it was a result of events beyond the Bank’s control, which could not reasonably have

been expected. With regards to the debt securities that were sold in 2015, management expected a reduction to the

issuer’s creditworthiness and decided to proceed with the respective sale.

The following are included in profit or loss with respect to held to maturity investments:

2014 2013

€'000 €'000

Impairment charge on held to maturity investments - (16.900)

25. Investment properties

2014 2013

€'000 €'000

On 1 January 254.990 296.068

Additions 248 4.650

Disposals (1) (556)

Transfer to properties held for sale (531) (24.312)

Transfer from property, plant and equipment 10.213 11.874

Fair value loss (16.762) (32.734)

At 31 December 248.157 254.990

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.



65

26. Property, Plant and Equipment

2014 Land and

Buildings

Property

Under

Construction

Machinery

and

Equipment

Total

€'000 €'000 €'000 €'000

Cost or valuation

At 1 January 289.860 22.711 123.673 436.244

Additions 172 8.130 2.235 10.537

Disposals (361) - (4.148) (4.509)

Adjustments for revaluation (2.099) - - (2.099)

Impairment charge (13) - (175) (188)

Reclassification from/to properties under

construction 11.814 (12.292) 478 -

Transfers to investment properties (10.190) (37) - (10.227)

Transfers to intangible assets - - (127) (127)

Balance at 31 December 2014 289.183 18.512 121.936 429.631

Depreciation

At 1 January 3.909 - 100.471 104.380

Charge for the year 5.528 - 6.150 11.678

On disposals (167) - (4.148) (4.315)

Adjustment for revaluation (1.163) - - (1.163)

Impairment charge - - (5) (5)

Transfers to investment properties (14) - - (14)

Transfers to intangible assets - - (114) (114)

Balance at 31 December 2014 8.093 - 102.354 110.447

Net book value at 31 December 2014 281.090 18.512 19.582 319.184



66

26. Property, Plant and Equipment (continued)

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)


Reclassification from/to properties under

construction 3.264 (3.837) 573 -

Transfers to investment properties (12.711) (12) - (12.723)

At 31 December 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)


Impairment charge - - 7.867 7.867

Transfers to investment properties (849) - - (849)

At 31 December 3.909 - 100.471 104.380

Net book value at 31 December 2013 285.951 22.711 23.202 331.864

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:

2014 2013

€'000 €'000

Net book value 194 2.366

Loss from the disposal of property, plant and equipment (81) (77)

Receipts from disposal of property, plant and equipment 113 2.289



67

27. Intangible Assets

Rights for

use

Computer

Software Total

€'000 €'000 €'000

Cost

At 1 January 2013 123 20.036 20.159

Additions - 268 268

At 1 January 2014 123 20.304 20.427

Additions - 286 286

Disposals - (256) (256)

Impairment charge (39) - (39)

Transfer from property, plant and equipment - 127 127

At 31 December 2014 84 20.461 20.545

Amortisation

At 1 January 2013 12 17.704 17.716

Charge for the year 4 922 926

At 1 January 2014 16 18.626 18.642

Charge for the year - 773 773

Disposals - (256) (256)

Transfer from property, plant and equipment - 114 114

At 31 December 2014 16 19.257 19.273

Net book value at 31 December 2014 68 1.204 1.272

Net book value at 31 December 2013 107 1.678 1.785



68

28. Investments in subsidiaries

The financial entities and institutions with exclusive trading activities, having assets which were consolidated are

presented below:

Name Country of

incorporati

on

% of

Ownership

Main

Activities

Troodos Cooperative Credit Society Ltd Cyprus 99 Financial

Paphos Cooperative Savings Society Ltd Cyprus 99 Financial

Limassol Cooperative Savings Society Ltd Cyprus 99 Financial

Strovolos Cooperative Credit Society Ltd Cyprus 99 Financial

Famagusta-Larnaka Cooperative Savings Society Ltd Cyprus 99 Financial

Nicosia Cooperative Savings Society Ltd Cyprus 99 Financial

Telecommunications Energy and Banks Employees Cooperative Savings

Society Ltd

Cyprus 99 Financial

Ledra Cooperative Credit Society Ltd Cyprus 99 Financial

Allileggyis Cooperative Credit Society Ltd Cyprus 99 Financial

Lakatamia-Dheftera Cooperative Credit Society Ltd Cyprus 99 Financial

Makrasyka-Larnaka-District of Famagusta Cooperative Credit Society Ltd Cyprus 99 Financial

Cyprus Educational Cooperative Savings Society Ltd Cyprus 99 Financial

Cyprus Police and Military Cooperative Savings Society Ltd Cyprus 99 Financial

Kokkinochoria Cooperative Credit Society Ltd Cyprus 99 Financial

Periferiaki Limassol Cooperative Credit Society Ltd Cyprus 99 Financial

Periferiaki Nicosia Cooperative Credit Society Ltd Cyprus 99 Financial

Tamassos-Orinis and Pitsilias Cooperative Credit Society Ltd Cyprus 99 Financial

Cyprus Civil Servants Cooperative Building and Savings Society Ltd Cyprus 99 Financial

Pancyprian Cooperative Confederation Ltd Cyprus 91,24 Trading

Cooperative Computer Society (S.E.M) Ltd Cyprus 99,93 Trading

NEW SEVEGEP LTD Cyprus 83,71 Trading

SOPAZ Ltd Cyprus 58,34 Trading

PEAL Troodos Ltd Cyprus 59,46 Trading

Newfields Ltd Cyprus 100 Trading

Comarine Ltd Cyprus 59,48 Trading

Cooperative Federation of Carob Supply of Limassol Ltd Cyprus 90,98 Trading

Cooperative Federation of Carob Supply of Larnaka Ltd Cyprus 100 Trading

Cooperative Federation of Carob Supply of Pafos Ltd Cyprus 98,78 Trading

Cooperative Federation of Carob Supply Ltd Cyprus 66,67 Trading

Synergas Co-operative Society Ltd Cyprus 20,40 Trading

The percentage of participation of CCB to the share capital of the CCIs at 99% was formed in 2014 following the

completion of all mergers and the increase of the CCI’s share capital. At 31 December 2013, CCB was exercising,

directly and indirectly, full control over the Group’s subsidiaries through the Decree as analyzed in note 1.1.1 of

consolidated financial statements. Synergas Co-operative Society Ltd is considered a subsidiary of the Group since

the Cooperative Credit Sector has the majority in the company’s Committee with a 3:2 ratio. The term of the

committee will end in 2015.

28.1 Changes in ownership interests of subsidiaries

On 24 February 2014, according to the terms of the Restructuring Plan, the Group was recapitalized and restructured,

resulting in the recognition of non-controlling interests, arising both from the credit institutions and the companies of

the trading sector. As at 31 December 2014, the non-controlling interests amounted to €28.244 thousand.



69

28. Investments in subsidiaries (continued)

28.1 Changes in ownership interests of subsidiaries (continued)

The following summarizes the effect of changes in the Bank’s ownership interests in the companies of the credit and

trading sector:

€'000

Total equity attributable to the shareholders as at 1 January 2014 (534.190)

Increase of share capital 1.170.000

Effect of decrease in equity holders’ ownership interest (27.759)

Share of comprehensive income 30.329

Total equity attributable to the shareholders as at 31 December 2014 638.380

29. Investments in associates

2014 2013

€'000

€'000

On 1 January 208 213

Write offs (3) (12)

Share of results of associates before tax 3 8

Share of tax of associates (Note 15.1) (1) (1)

At 31 December 207 208

Details of investments are as follows:

Name

Country of

incorporation

Main activities Participation

%

P&S Lpg Gas LTD Cyprus Trading gas 50

Holco Holdings LTD Malta Shipping 20

30. Other assets

2014 2013

€'000 €'000

Accrued revenues 2.188 3.005

Debtors of trading sector 16.978 10.755

Receivables for cash deficit 44 2.221

Receivables for inventory deficit 159 138

Prepayments 2.768 3.242

Rent debtors 2.474 1.774

Refundable taxes (Note 38) 8.451 8.588

Other receivables 38.557 16.556

71.619 46.279

The exposure of the Group to credit risk and impairment losses in relation to other assets is reported in note 46.1 of

the consolidated financial statements.



70

31. Amounts due to other banking institutions

2014 2013

€'000 €'000

Cheques under clearing 8.518 5.740

Deposits from banks 25.463 23.779

Loans from banks 60.362 54.081

94.343 83.600

32. Deposits and other customer accounts

2014 2013

€'000 €'000

Current 609.441 925.839

Savings 1.617.206 1.677.169

Notice 737.555 1.146.161

Fixed 8.509.659 9.126.936

Student 78.581 50.996

Permanent 749.836 417.936

12.302.278 13.345.037

Accrued interest 90.330 132.112

12.392.608 13.477.149

2014 2013


On demand 2.461.379 2.719.776

Within three months 4.155.779 6.582.221

Between three months and one year 5.339.334 3.133.199

Between one and five years 88.607 23.639

Over five years 347.509 1.018.314

12.392.608 13.477.149

33. Repurchase agreements

2014 2013

€'000 €'000

Repurchase agreements - 202.581

On 31 December 2014 the Bank did not have pledged debt securities in favor of the Central Bank of Cyprus (2013:

€744.807 thousand). In January 2014, the Bank proceeded to the early repayment of the repurchase agreement. During

the year, the Bank has entered into short-term repurchase agreements.

34. Other loans

2014 2013

€'000 €'000

Loans for reactivation of refugees 20.615 22.000

Other loans payable 685 52.206

21.300 74.206



71

34. Other loans (continued)

The loans to the Group for the reactivation of refugees as well as the loans granted by the Group to the refugees during

the period 1974-1984, bear no interest from 1 January 2001 and they are repaid at the same time period and amount

as they are received from the debtors.

35. Loan for the repayment of refugee deposits

2014 2013

€'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 19, are interest free and frozen.

36. Loan Capital

Tier 2 capital (non reversible bonds)

2014 2013

€'000 €'000

On 1 January - 20.110

Repayments - (2.481)

Conversion to fixed deposits - 17.660

- (31)

Accrued interest - 31

At 31 December - -

(a) On 31 December 2010, Strovolos Cooperative Credit Society Ltd, member of the Cooperative Credit 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, Strovolos Coopertive Credit Society Ltd proceeded with a second issue of non reversible

bonds (straight 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 Strovolos Cooperative Credit Society Ltd 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 Strovolos Cooperative Credit Society Ltd. 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 years) and fixed interest rate of 8,0% on their nominal value for the period from 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 ends on 30 June 2011, every subsequent interest period will be

semi-annually and the interest will be paid in cash at the end of the period ending on 30 June and 31 December.



72

36. Loan Capital (continued)

After the decision of the General Meeting held by the members of Strovolos Cooperative Credit Society Ltd on 19

December 2012, regarding the conversion of the member’s liability from unlimited to limited, effective from 1

February 2013 and according to the Cooperative Company Law, Strovolos Cooperative Credit Society Ltd withdrew

the bonds, giving the right to its owners to either convert them to a corresponding fixed deposit with an interest rate

of 6,5% or liquidate them. As per the above, in 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 paid out by Strovolos Cooperative Credit

Society Ltd to its owners.

37. Other liabilities

2014 2013

€'000 €'000

Creditors of the trading sector 6.296 3.958

Customer prepayments 582 566

Social insurance and other taxes 1.773 1.859

Value Added Tax 1.595 1.678

Special contribution for defence - withheld 14.039 20.513

Amounts due to customer accounts 2.993 2.450

Provision for charity purposes - 505

Deferred income 53 90

Other liabilities 65.060 46.485

92.391 78.104

38. Refundable taxes (Note 30)

2014 2013

€'000 €'000

Corporation tax (8.399) (8.608)

Special contribution for defence (3) 13

Special tax levy on Credit Institution Deposits (49) 7

(8.451) (8.588)



73

39. Deferred tax

Deferred tax is calculated in full on all temporary differences under the liability method using the applicable tax rates

(Note 15).

Deferred tax is measured based on the tax rates that are expected to be applied in the period in which the assets will

be realized or the liability will be settled, taking into account the tax rates and laws that have been enacted or

substantially 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 Group intends

to settle its current tax assets and liabilities on a net basis.

Based on International Accounting Standard 12, the recognition of deferred tax arises from the tax losses of CCB and

the CCIs that are transferred from 2013 and depends on the profitability forecasts which were prepared by the Bank’s

management in 2014 (which are based on the available data, including historic profitability levels). Therefore, it is

probable that future taxable profits will arise in the Group against which the deferred tax asset may be used.

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 2013 5.610 18.038 24.124 2.984 50.756

Debit / (Credit) to:

Statement of profit or loss and

other comprehensive income

(Note 15.1) 268 (16) (1.844) - (1.592)

Fair Value Reserve (Note 15.2) - 356 - - 356

At 1 January 2014 5.878 18.378 22.280 2.984 49.520


Statement of profit or loss and

other comprehensive income

(Note 15.1) (6) 2 (1.798) 29 (1.773)

Fair Value Reserve (Note 15.2) - (1.845) - - (1.845)

At 31 December 2014 5.872 16.535 20.482 3.013 45.902



74

39. Deferred tax (continued)

Deferred tax assets

Tax Losses

Temporary

tax

differences Total

€'000 €'000 €'000

Balance – 1 January 2013 510 253 763


Statement of profit or loss and other comprehensive income

(Note 15.1) ( 228) 45 (183)

At 1 January 2014 282 298 580


Statement of profit or loss and other comprehensive income

(Note 15.1) 16.193 (18) 16.175

At 31 December 2014 16.475 280 16.755

As at 31 December 2014, total taxable losses to be carried forward amounted to €375.129 thousand (2013: €318.418

thousand). An amount of €15.807 thousand, which relates to 12.5% of the losses, has been recognized as deferred tax

asset since, according to the business plan of the Cooperative Sector, are expected to be used against future profits

within the next five years.

40. Share Capital

2014 2014 2013 2013

Number of

shares €'000

Number of

shares €'000

Authorized

1.562.500.000 shares at €1.28 each 1.562.500.000 2.000.000 234.192.038 2.000.0000

Issued and fully paid

On 1 January 11.807.464 100.836 11.807.464 100.836

Issue of shares 1.171.875.000 1.500.000

Decrease in nominal value of shares - (85.723) - -

At 31 December 1.183.682.464 1.515.113 11.807.464 100.836

On 1st July 2013 there was a Special General Meeting during which it was decided to increase the authorized share

capital of the Bank to two billion euro (€2.000.000.000), comprising of two hundred and thirty four millions one

hundred ninety two thousands and thirty eight (234.192.038) shares with nominal value of eight euro and fifty four

cents (€8,54) each.

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 99% and of the existing shareholders of CCB is 1%. For this purpose,

the Cooperative Holding Company of CCB is established according to the article 12E of the Cooperative Companies

Law, to which all existing shareholders of CCB are transferred with a participation to its capital proportionally

equivalent to the participation each shareholder had in the share capital of CCB.

On 28 February 2014, the General Meeting of members of the Bank approved the reduction in the nominal value per

share from €8,54 to €1,28 as well as the increase in the number of shares of the authorized share capital to

1.562.500.000.



75

40. Share Capital (continued)

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.

On 10 March 2014, the Bank issued 1.171.875.000 shares of €1,28 each to the Republic of Cyprus, for the purpose of

the recapitalization of the Cooperative Credit Sector.

The total issued and fully paid share capital on 31 December 2014 was 1.183.682.464 shares with nominal value of

€1,28 each (31 December 2013: 11.807.464 shares with nominal value of €8,54 each).

41. 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 transferred to statutory reserve.

41.1 Statutory Reserve

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. The reserve is distributed as per the Recapitalization of Cooperative Central Bank /

Central Body Decree of 2013, as subsequently amended.

41.2 Fair Value Reserve

The fair value reserve for land and buildings arises from the revaluation of land and buildings. When the 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 or impaired.

41.3 Merger Reserve

The Merger reserve is substantially created from the merger of the CCIs and the companies of the trading sector that

are under common control, of CCB. The share capital amounts of the CCIs and the trading companies are transferred

to this reserve.

41.4 Deemed Distribution

Companies which do not distribute 70% of their profits after tax, as defined by the Special Contribution for 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.



76

42. Cash and cash equivalents

For the purpose of the consolidated cash flow statement, the cash and cash equivalents include:

2014 2013

€'000 €'000

Cash 116.128 100.837

Deposits with central banks (Note 17) 301.540 810.025

Deposits with other banking institutions (Note 18) 34.623 58.839

452.291 969.701

43. Contingent liabilities and commitments

In order to address the needs of its customers, the Group conducts business involving documentary credits and

guarantees, which as at the reporting date remained unutilised. These facilities are not recognized in the consolidated

statement of financial position and their nominal amounts as at 31 December are shown below:

43.1 Contingent liabilities and commitments

2014 2013

€'000 €'000

Contingent liabilities

Guarantees 67.337 96.410

Commitments

Undrawn or partly utilized limits of advances and loans 413.546 573.986

Documentary credits 6.207 1.868

419.753 575.854

487.090 672.264

The maturity of the contingent liabilities and commitments of the Group are as follows:

2014 2013

€'000 €'000

Within one year 110.781 207.377

Between one and five years 197.522 233.768

Over five years 178.787 231.119

487.090 672.264

Guarantees are irrevocable commitments by which the Group is responsible 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 limits of advances and loans are commitments to provide credit facilities to customers. The

credit facilities are provided for a fixed period of time, are reviewed 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, including the presentation of bills of lading or/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.



77

43. Contingent liabilities and commitments (continued)

43.2. Contingent tax liabilities

Income tax returns which are submitted to tax authorities are subject to review by the tax authorities. Upon future

review of the current and previous years’ income tax returns, of the Group and its subsidiaries by the tax authorities,

there is a possibility that additional tax will be imposed in the year under examination. The Committee is not able to

assess the amount of these contingent tax liabilities.

43.3. Commitments for capital expenditure

Capital expenditure contracted for at the reporting date but have not incurred yet is as follows:

2014 2013

€'000 €'000

Property, plant and equipment 1.972 3.013

Investment properties 17 15

1.989 3.028

43.4 Commitments from legal claims

On 31 December 2014, there were outstanding legal claims against the Bank and the CCIs, relating to their operations.

The Bank and the CCIs, in consultation with the legal advisors investigate each case and based on the legal advice

received, the appropriate accounting actions are taken as per the International Accounting Standard 37 “Provisions,

contingent liabilities and assets”.

44. Related parties transactions

Related parties include spouses, minor children and entities in which the members of the Committee/key management

personnel hold, directly or indirectly, at least 20% of the voting rights in a general meeting or they are directors or in

any way have control.

All transactions with members of the Committee and key management personnel, including their related parties, are

conducted on normal business terms. Regarding key management personnel, a number of advances are provided on

the same terms as to the rest of the personnel of the Group.

The following transactions were carried out with related parties:

44.1 Committee Members’ remuneration

The remuneration of Committee Members and other key management personnel was as follows:

2014 2013

€'000 €'000

Fees of Non-Executive Members of the Committee 236 143

Remuneration of Executive Members of the Committee 269 344

Remuneration of key management personnel 595 259

Employer contributions 162 130

1.262 876

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.



78

44. Related parties transactions (continued)

44.1 Committee Members’ remuneration (continued)

The key management personnel comprises of members of management who are executive members of the Committee.

44.2 Loans and other advances

2014 2013 2014 2013

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 7 1.870 893

Total 7 7 1.870 893

44.3 Deposits

2014 2013

€'000 €'000

Members of the Committee and key management personnel 2.496 1.248

Total 2.496 1.248

44.4 Contingent liabilities and commitments involving related parties

In addition, on 31 December 2014, there were contingent liabilities and commitments relating to guarantees and

unutilized limits as follows:

2014 2013

€'000 €'000

Members of the Committee, key management personnel and related parties 630 102

Total 630 102

44.5 Exposure with the Republic of Cyprus

2014

€'000

Bonds and Loans 1.326.650

Guarantees from loans and other advances to clients 535.679



79

45. Financial instruments by category

The accounting policies for financial instruments have been applied to the line items below:

31 December 2014

Loans and

receivables

At fair value

through profit

or loss

Available for

sale financial

assets

Investments

held to

maturity

Total

€'000 €'000 €'000 €'000 €'000

Assets as per consolidated

statement of financial position:

Cash and deposits with Central

Bank of Cyprus 533.665 - - - 533.665

Deposits with other banking

institutions 43.359 - - - 43.359

Financial assets at fair value through

profit or loss - - - - -

Loans and other advances to

customers 10.126.728 - - - 10.126.728

Available for sale financial assets - - 47.570 - 47.570

Investments held to maturity - - - 2.409.781 2.409.781

Other assets 60.399 - - - 60.399

Total 10.764.151 - 47.570 2.409.781 13.221.502

Loans and other

financial

liabilities Total

€'000 €'000

Liabilities as per consolidated statement of financial position:

Amounts due to other bank institutions 94.343 94.343

Deposits and other customer accounts 12.392.608 12.392.608

Other loans 21.300 21.300

Credit facilities 36.534 36.534


Total 12.612.195 12.612.195



80

31 December 2013

Loans and

receivables

At fair value

through profit

or loss

Available for

sale financial

assets

Investments

held to

maturity

Total

€'000 €'000 €'000 €'000 €'000

Assets as per consolidated

statement of financial position:

Cash and deposits with Central

Bank of Cyprus 1.060.112 - - - 1.060.112


institutions 64.133 - - - 64.133

Financial assets at fair value

through profit or loss - 202 - - 202


customers 10.778.140 - - - 10.778.140

Available for sale financial assets - - 24.825 - 24.825

Investments held to maturity - - - 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

Loans and other

financial

liabilities Total

€'000 €'000

Liabilities as per consolidated statement of financial position:

Amounts due to other bank institutions 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


Total 13.725.453 13.725.453



81

46. Financial Risk Management

Financial risk factors

The Bank is developing a comprehensive risk management framework which aims to the effective monitoring and

management of risk on a consolidated basis. The framework aims to:

- The measurement and monitoring of the main types of risks which the Group is exposed.

- The development of policies and procedures for the underwriting and management of each risk

- The compliance with supervisory obligations including maintaining sufficient capital.

The Committee and the Risk Management Committee, are responsible for the management of the risks. In accordance

with the regulatory requirements, an independent Risk Management Department has been established which submits

regular reports and recommendations and aims to develop appropriate methodologies for managing the risks.

The most significant risks to which the Group is exposed to are credit risk, market risk, liquidity risk and capital risk

management. These risks are monitored and managed as follows:

The Committee and the Risk Management Committee assess on a systematic basis the risk concentrations especially

when it relates to advances and take all necessary actions for managing those risks.

46.1 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 base to a single customer and its related parties taking into account the effect of credit risk

mitigation. As at 31 December 2014, the Group was in compliance with 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 balances were applied, as they are presented in the consolidated statement of

financial position.



82

46.Financial Risk Management (continued)

46.1 Credit risk (continued)

Maximum exposure to credit risk:

2014 2013

€'000 €'000

Deposits with central banks (Note 17) 417.537 959.275

Deposits with other banking institutions (Note 18) 43.359 64.133

Loans and other advances to customers (Note 19) 13.095.223 13.363.755

Investments held to maturity (Note 24) 2.409.781 1.017.476

Other receivables 60.399 34.549

Total 16.026.299 15.439.188

Contingent liabilities (Note 43.1) 67.337 96.410

Commitments (Note 43.1) 419.753 575.854

Total not included on the consolidated statement of financial position 487.090 672.264

Total credit risk exposure 16.513.389 16.111.452

As shown above, 79,3% of the total credit risk exposure arises from loans and other advances to customers, 14,6%

from investments held to maturity and 2,5% from deposits with Central Banks.

46.1.1 Impaired advances

If the Group assesses that the total amount of the capital and interest due may not be recovered according to the

contractual terms of the loan or the relevant agreement, it classifies these advances as impaired.

46.1.2 Non impaired advances

The Group’s loans which were assessed individually and no impairment was identified are classified in risk tiers as

follows:

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 180 days or are impaired.

46.1.3 Advances which are past due but not impaired

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.



83

46.Financial Risk Management (continued)

46.1 Credit risk (continued)

46.1.4 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.

As at 31 December 2014, the Group proceeded with the renegotiation of the repayment terms of advances of

€1.979.083 thousand (2013: €1.549.151 thousand), that mainly relate to loans to private individuals.

Under the new definition of EBA, 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 or full or partial refinancing of the problematic advance.

A restructured non-performing facility remains classified as non-performing for twelve months following the

restructuring date. 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 new definition of EBA, if any delays occur or if there are concerns about

the full repayment of the advance according to the revised repayment schedule.

46.1.5 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 31 December 2014 (covered with 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% 288.885 1.265.616 384.979 77.227

(20%-40%) 79.921 163.001 85.770 7.436

(40%-60%) 232.258 321.524 172.896 18.209

(60%-80%) 407.585 503.820 245.613 15.186

(80%-100%) 573.113 621.109 237.961 3.455

(100%-120%) 1.195.121 1.136.983 524.990 428.256

(120%-140%) 780.415 564.397 304.300 6.344

>=140% 1.056.217 668.340 512.953 211.313

Total 4.613.515 5.244.790 2.469.492 767.426

% Fully Secured 66% 45% 54% 84%



84

46. Financial Risk Management (continued)

46.1 Credit Risk (continued)

46.1.5 Collateral (continued)

Ratio of Loans to Value (loan balance/market value of collateral):

Ratio of Loans to Value (loan

balance/market value of collateral)


balance)

Percentage of the total loans with

property collaterals

€'000 %

<20% 1.020.619 7,79%

(20% - 40%) 1.888.674 14,42%

(40% - 60%) 2.019.515 15,42%

(60% -80%) 1.875.517 14,32%

(80%-100%) 1.177.452 8,99%

>= 100% 2.230.928 17,04%

Total 10.212.705 77,98%

The loan balance in relation to the total amount of advances to customers relates to those that did not have immovable

property as collateral.

The total ratio of loan coverage per type of exposure as at the 31 December 2013 (covered with 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%



85



46.1.5 Collateral (continued)

Ratio of Loans to Value (loan balance/market value of collateral):


balance/market value of collateral)


balance)

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%

46.1.6 Analysis of Collateral and guarantees

Collateral value

Collateral on

immovable

property

Financial

collaterals

Other

collaterals

Total

collaterals

31/12/2014 €’000 €’000 €’000 €’000

Private 9.520.083 288.601 498.629 10.307.313

Business 2.040.893 130.315 619.745 2.790.953

Public Sector 35.600 16.004 1.223.207 1.274.811

Total 11.596.576 434.920 2.341.581 14.373.077



86



31 December 2014 Loans and other

advances to

customers

Deposits with

other banking

institutions

Investments

held to maturity Total

€'000 €'000 €'000 €'000

Carrying amount 10.126.728 43.359 2.409.781 12.579.868

Individually impaired:

Grade 3 (high risk) 7.377.799 - - 7.377.799

Provisions for impairment (2.634.834) - - (2.634.834)

Carrying amount 4.742.965 - - 4.742.965

Advances with conditions that were

renegotiated 1.072.677 - - 1.072.677

Past due but not impaired:

Grade 1 (low risk) 1.160.561 - - 1.160.561

Grade 2 (medium risk) 7.797 - - 7.797

Grade 3 (high risk) 34.037 - - 34.037

Carrying amount 1.202.395 - - 1.202.395

Analysis of past due:

0-30 days 724.038 - - 724.038

30-60 days 276.042 - - 276.042

60-90 days 160.482 - - 160.482

90 days+ 41.883 - - 41.883

Carrying amount 1.202.395 - - 1.202.395


renegotiated 231.255 - - 231.255

Neither past due nor impaired:

Grade 1 (low risk) 4.515.029 43.359 2.409.781 6.968.169

Grade 2 (medium risk) - - - -

Carrying amount 4.515.029 43.359 2.409.781 6.968.169


renegotiated 675.151 - - 675.151

Balances after individual impairment 10.460.389 43.359 2.409.781 12.913.529

Collective impairment (333.661) - - (333.661)

Total carrying amount 10.126.728 43.359 2.409.781 12.579.868



87



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 3 (high risk) 5.453.847 - - 5.453.847

Provisions for impairment (824.228) - - (824.228)

Carrying amount 4.629.619 - - 4.629.619


renegotiated 750.332 - - 750.332

Past due but not impaired:

Grade 1 (low risk) 640.882 - - 640.882


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


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


Carrying amount 6.031.765 64.133 1.017.476 7.113.374


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



88


46.2 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:

46.2.1 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.



89


46.2 Market risk (continued)

46.2.1 Currency risk (continued)

31 December 2014 Euro

United States

Dollars

British

pounds

Other

currencies Total

€'000 €'000 €'000 €'000 €'000

Assets

Cash 111.734 2.187 1.821 386 116.128

Deposits with central banks 417.537 - - - 417.537


institutions 10.463 13.410 15.797 3.689 43.359


customers 10.126.728 - - - 10.126.728

Inventories 38.983 - - - 38.983

Properties held for sale 79.582 - - - 79.582

Available for sale financial assets 47.570 - - - 47.570

Investments held to maturity 2.409.781 - - - 2.409.781

Investment properties 248.157 - - - 248.157

Investments in associates 207 - - - 207

Property, plant and equipment 319.184 - - - 319.184

Intangible assets 1.272 - - - 1.272

Other assets 88.374 - - - 88.374

Total 13.899.572 15.597 17.618 4.075 13.936.862

Liabilities

Amounts due to other bank

institutions 94.257 31 55 - 94.343

Deposits and other customer

accounts 12.362.835 11.680 14.870 3.223 12.392.608

Repurchase agreements - - - - -

Other loans 21.300 - - - 21.300

Loan for the repayment of refugee

deposits 36.534 - - - 36.534

Other liabilities 138.248 45 - - 138.293

Total 12.653.174 11.756 14.925 3.223 12.683.078

Equity 1.253.784 - - - 1.253.784

Total liabilities and equity 13.906.958 11.756 14.925 3.223 13.936.862

Net currency position (7.386) 3.841 2.693 852 -



90




Sensitivity analysis

Change in exchange rate +% 5,0% 4,0% 6,0%

Impact on net profit € 192 108 51

Impact on equity € 192 108 51

Change in exchange rate -% 5,0% 4,0% 6,0%

Impact on net profit € (192) (108) (51)

Impact on equity € (192) (108) (51)

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


institutions 40.343 10.391 11.294 2.105 64.133


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 1.785 - - - 1.785

Other assets 47.067 - - - 47.067

Total 13.670.256 17.488 17.020 3.827 13.708.591

Liabilities


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) -



91





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

46.2.2 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.



92

46. Financial risk management (continued)


46.2.2 Interest rate risk

31 December 2014

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 - - - - - 116.128 116.128

Deposits with central banks - 301.540 - - 115.997 - 417.537


institutions 2.872 31.751 8.736 - - - 43.359


clients (gross) 10.523.191 148.400 2.354.280 7.670 61.682 - 13.095.223

Inventories - - - - - 38.983 38.983

Properties held for sale - - - - - 79.582 79.582


through profit or loss - - - - - - -

Available for sale financial

assets - 17.458 - - - 30.112 47.570

Investments held to maturity 2.685 2.280 1.608.431 742.158 54.227 - 2.409.781

Investment properties - - - - - 248.157 248.157

Property, plant and

equipment - - - - - 319.184 319.184

Intangible assets - - - - - 1.272 1.272

Other assets - - - - - 88.581 88.581

Total 10.528.748 501.429 3.971.447 749.828 231.906 921.999 16.905.357

Liabilities


institutions 13.417 86 20.529 - 60.311 - 94.343


accounts 6.932.278 5.428.547 31.783 - - - 12.392.608

Repurchase agreements - - - - - - -

Other loans 2.505 - 32 - 18.763 - 21.300

Loan for the repayment of

refugee deposits - - - - - 36.534 36.534

Other liabilities - - - - - 138.293 138.293

Total 6.948.200 5.428.633 52.344 - 79.074 174.827 12.683.078

Net position 3.580.548 (4.927.204) 3.919.103 749.828 152.832 747.172 4.222.279

Net cumulative position 3.580.548 (1.346.656) 2.572.447 3.322.275 3.475.107 4.222.279

Loans and other advances to customers do not include the accumulated impairment provisions of €2.968.495 thousand.



93



46.2.2 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 - 810.025 - 149.250 - - 959.275


institutions 4.377 54.462 5.294 - - - 64.133


clients (gross) 11.327.536 171.874 1.808.753 9.833 45.759 - 13.363.755

Inventories - - - - - 44.676 44.676

Properties held for sale - - - - - 83.321 83.321


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 - - - - - 1.785 1.785

Other assets - - - - - 47.067 47.067

Total 11.331.913 1.036.361 1.814.047 159.083 1.063.235 889.567 16.294.206

Liabilities

Amounts due to other

institutions - 77.860 - - - 5.740 83.600


accounts 5.609.188 2.885.953 4.941.699 40.309 - - 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 5.609.431 2.975.597 4.982.990 40.309 260.003 133.364 14.001.694

Net position 5.722.482 (1.939.236) (3.168.943) 118.774 803.232 756.203 2.292.512

Net cumulative position 5.722.482 3.783.246 614.303 733.077 1.536.309 2.292.512

Loans and other advances to customers do not include the accumulated impairment provisions of €2.585.615 thousand.



94



46.2.2 Interest rate risk (continued)


An increase of 200 basis points in interest rates on 31 December 2014 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

equity and profit. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Equity Profit or loss

2014 2013 2014 2013

€'000 €'000 €'000 €'000

Impact (46.952) 15.363 91.827 15.363

46.2.3 Investment price risk

The risk comes from adverse changes in current prices of the investments in shares held by the Group.

46.3 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 2014

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


accounts 12.392.608 12.574.065 2.436.853 4.215.548 5.405.360 95.686 420.618


institutions 94.343 103.648 14.246 86 28.635 - 60.681

Repurchase agreements - - - - - - -

Other liabilities 196.127 178.102 46.502 33.593 15.141 11.511 71.355

Total liabilities 12.683.078 12.855.815 2.497.601 4.249.227 5.449.136 107.197 552.654



95


46.3 Liquidity Risk (continued)

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


accounts 13.477.149 13.662.885 2.989.828 7.002.302 3.080.632 233.888 356.235


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

46.4 Other risks

46.4.1 Capital risk management

The primary regulatory authority, which determines and monitors the Group’s capital requirements is CBC. CBC is

guided in its regulatory role by the recommendations of the Basel Committee and the European Union instructions

for banking matters. The Group is governed by SSM.

On 26 June 2013, the European Parliament and the Board approved the Regulation (EU) no.575/2013 (Capital

Requirements Regulation- CRR), which relates to the prudential requirements for credit institutions, as well as the

Directive 2013/36/EU (Capital Requirements Directive IV- CRD IV), which relates to the access to the activity of

credit institutions and the prudential supervision of credit institutions (Basel III).

In August 2014, CBC has issued a Directive for the purposes of determining the Distinctive Discretions and the

Transitional Provisions provided by Regulation (EU) no. 575/2013, by exercising its power pursuant to the article 41

of the Business of Credit Institutions Law of 1997 to (no. 4) of 2013 and under Regulation (EU) no. 575/2013.

The Basel III 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 – Disclosure of information:

Pillar III requires, amongst others, 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 information regarding

the composition of the institution’s capital.



96


46.4 Other risks (continued)

46.4.1 Capital risk management (continued)

In the context of legislative and regulatory demands for the connection of the CCIs into a central organization as per

the instructions of the European Union, the Cooperative Central Bank Ltd assumed the role of central organization,

defined as ‘Central Body’. The Central Body started to operate on 1 January 2008. Cooperative Central Bank Limited,

by assuming its new role of the Central Body in compliance with the European Directive 2000/12/EC, as recast with

the 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.

Relative disclosures regarding the policies of risk management and results of calculating capital adequacy are

published online in the webpage of the Cooperative Central Bank Ltd, www.coopbank.com.cy.

The Group’s equity entirely comprises of Common Equity Tier 1 Capital which includes issued share capital and

reserves (including revaluation reserve). Common Equity Tier 1 Capital excludes the participation of the affiliated

CCIs, intangible assets and the amount of deferred tax assets which depends on the future profitability and does not

arise from temporary differences, subject to the transitional provisions of CBC.

The capital adequacy of the Group is monitored by the management every quarter. The required reports are submitted

every quarter to CBC, for calculating the capital requirements and Large Exposures on a collective basis.

CBC, in a letter dated 29.05.2014, has set the minimum capital ratio Common Equity Tier 1 ratio at 8%.

As at 31 December 2014, the Capital Adequacy Ratios of the Cooperative Sector (Total Capital, Tier 1 Capital, and

Common Equity Tier 1 Capital) amounted to 13,56% (as at 31 December 2013: the capital adequacy ratios of the

Cooperative Sector was 13,60%). The capital adequacy ratios were calculated based on the new legislation and the

Directive of the European Central Bank on minimum capital requirements for credit institutions (Capital Requirement

Regulation (CRR)/Capital Requirement Directive (CRD IV)) dated 26 June 2013 which came into force on 1st January

2014 and the relevant circulars of the Central Bank of Cyprus, based on Pillar 1.



97



46.4.1 Capital risk management (continued)

For the years 2014 and 2013, the Group complied with all capital requirements, as presented below:

2014 2013

€'000 €'000

Own Funds

Common Equity Tier 1 1.221.534 1.77.809

Total risk weighted assets 9.009.397 8.666.451

% %

Common Equity Tier 1 13,56 13,60

Minimum capital ratio of Common Equity Tier 1 8,00 9,00

46.4.2 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, 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.

46.4.3 Operational risk

Operational risk is the risk that financial loss will arise due to inadequate or failed internal processes, human resources

and systems or from external events.

Operational risk includes legal risk and compliance risk but excludes the strategic and reputational risk.

Legal risk includes, but it is not limited, to the risk of criminal prosecution as a result of disputes with clients or other

counterparties.

Compliance risk includes, but it is not limited, to the risk of imposed penalties as a result of non-compliance with the

legal and regulatory framework.

The Bank’s risk management department is responsible for the management of operational risk in the CCIs through

the development and implementation of specialized methodologies, tools and systems and through which it will

achieve the recognition evaluation, control/reduction and monitoring of the operational risk including legal risk and

risk arising from computer software. The management of operational risk is, also, directly related with the preparation

of action plans/implementation of corrective measures in cases where high operational risk areas are identified and

require improvement.



98



46.4.3 Operational risk (continued)

Specifically, the risk management department maintains a database which includes events that will result in a loss and

that includes operational risk events which are classified under seven (7) categories of type event of Basel II. The

collection of operational risk events of high financial risk effect is achieved by maintaining this database, which are

subsequently used on the calculation on the capital requirements of the operational risk and losses with qualitative

effects for which corrective measures are taken for their mitigation or avoidance.

47. 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 in 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 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.

47.1 Measurements of fair value recognized in the consolidated financial position

The table below analyses the financial instruments 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).



99

47. Fair value of financial instruments (continued)

47.1 Measurements of fair value recognized in the consolidated financial position (continued)

31 December 2014 Level 1 Level 2 Level 3 Total

€'000 €'000 €'000 €'000

Financial assets

Fair value through profit or loss

Investments in shares - - - -

Financial assets available for sale

Investments in debt securities - 17.458 - 17.458

Investments in shares 14.780 15.332 - 30.112

Total 14.780 32.790 - 47.570

31 December 2013 Level 1 Level 2 Level 3 Total

€'000 €'000 €'000 €'000

Financial assets

Fair value through profit or loss

Investments in shares 202 - - 202

Financial assets available for sale

Investments in debt securities - 10.252 - 10.252

Investments in shares 14.573 - - 14.573

Total 14.775 10.252 - 25.027



100

48. Analysis of performing and non-performing loans

Total loan portfolio Accumulated impairment losses

of which non- performing advances

of which advances with conditions that were

renegotiated

of which non- performing advances

of which advances with conditions that were renegotiated

of which non-performing advances

of which non-performing advances

€000 €000 €000 €000 €000 €000 €000 €000

Total advances* 13.095.223 7.315.120 1.979.083 1.050.564 2.968.495 2.610.527 360.534 270.915

General governments 767.427 46.311 20.537 5.436 21.240 7.869 3.192 1.326

Other financial businesses 3.640 616 646 361 246 90 45 21

Non- financial business 2.017.873 1.315.689 274.374 187.426 572.338 507.509 60.437 49.934

of which: small and medium businesses 1.923.585 1.269.708 161.918 96.569 572.254 507.425 36.702 28.071

of which: commercial and real estate businesses 313.850 243.425 33.437 15.299 97.786 89.702 6.249 3.969

Per segment:

1. Construction 233.561 166.238

69.287

2. Wholesale and retail trade 318.795 218.910 117.253

3. Real estate businesses 697.739 547.309 218.258

4. Accommodation, food and beverage services 134.432 87.320 24.729

5. Other segments 633.346 295.912 142.811

Private individuals 10.306.283 5.952.504 1.683.526 856.841 2.374.671 2.095.059 296.680 219.634

of which: Housing loans 4.611.879 2.206.620 673.930 269.279 816.251 683.995 102.822 65.800

of which: Consumer loans 5.244.790 3.400.968 157.848 69.892 1.436.309 1.298.148 28.762 20.979

* excluding loans to central banks and credit institutions



101

48. Analysis of performing and non-performing loans (continued)

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 individuals

Credit facilities for the acquisition/

construction of property:

(a) Owner occupancy 4.622.457 2.469.490 431.079 2.900.569 1.721.888

(b) 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



102

49. Loan portfolio analysis as at 31 December 2014 based on the date the loans were issued

Total advances

Total loan portfolio Advances to non-financial businesses Advances to other financial businesses Advances to individuals

€000

Non-performing advances

Accumulated provisions

Non-performing

advances Accumulated

provisions

Non-performing advances

Accumulated provisions

Non-performing

advances Accumulated

provisions

€000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000

Within 1 year 243.790 92.178 43.583 41.846 23.301 8.928 16 - - 201.928 68.877 34.655

1 - 2 years 913.153 429.347 144.730 143.770 80.587 27.884 504 361 28 768.879 348.399 116.818

2 - 3 years 1.426.528 650.187 244.969 200.293 128.569 49.283 277 - 23 1.225.958 521.618 195.663

3 - 5 years 4.109.034 2.231.099 823.580 703.407 431.145 177.425 540 73 66 3.405.087 1.799.881 646.089

5 - 7 years 2.599.042 1.734.006 735.027 390.324 268.036 125.357 28 7 9 2.208.690 1.465.963 609.661

7 - 10 years 2.437.408 1.173.769 475.148 971.961 204.077 85.118 77 40 1 1.465.370 969.652 390.029

Over 10 years 1.366.268 1.004.534 501.458 333.699 226.285 119.583 2.198 135 119 1.030.371 778.114 381.756



103

49. Loan portfolio analysis as at 31 December 2013 based on the date the loans were issued (continued)

Date of issue Total loan portfolio Advances to legal entities Advances to individuals for acquisition/

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



104

50. Events after the reporting period

The Board of Directors of CBC, in a meeting held on 16 February 2015, decided to diversify the maximum deposit

interest rate, as defined in the formula used for calculating the additional capital requirements of banks, by a decrease

of one percentage point.

On 13 February 2015, the Committee of CCB decided to proceed with a decrease of 1% to the interest charged to all

performing housing loans effective from 1st March 2015. On 26 February 2015 the Committee of CCB assessed the

decision of CBC to decrease the deposit interest rate by 1% and proceeded with further reductions to the loans interest

with the aim of easing the borrowers.

Beginning of 2015, the Swizz National Bank (SNB) decided to withdraw the limit of the exchange rate of the Swiss

Franc against the Euro. It is evaluated by financial analysts that the differentiation in the exchange rate of Swiss Franc

will force the borrowers to pay more money to repay the capital and the installments of their housing loans. CCB

announced that this decision does not affect the Group since no loans in Swiss Franc have been granted.

On 27 March 2015, the European Stability Mechanism bond was compensated and exchanged for cash.

On 3 April 2015, the revised directive regarding the management of advances with arrears, was published in the

Government Gazette, which is issued by Central Bank of Cyprus, exercising its power as per the Credit Institutions

Law.

On 18 April 2015 the Parliament has voted the adoption of five legal bills which relate to the insolvency framework

while suspending the foreclosure law which ended on 16 April 2015. The revised foreclosure law allows forced sale

of mortgaged property through private auctions while limiting any delays present under the existing legislation.

In accordance with the framework, Individual Debt Repayment Plans are adopted, through which under, certain

conditions, the restructuring of individuals’ debts is expected to be achieved in order to ensure the repayment of

creditors and maintain, where possible, the first residence. The Insolvency Consultant will be responsible for the

preparation of a repayment plan based on the borrower’s financial position, which should receive the consent of the

creditors. In certain cases and under conditions and criteria, the relevant plan may be imposed on the financial

institution through court.

In addition, a Debt Relief Mechanism is enacted which through judicial decrees, debtors who do not have enough

available income or assets that could be used to repay their debt, will be released from a debt up to €25.000.

The framework includes provisions regarding handling of guarantors, defined as individuals. In summary, it is stated

that the obligation of the guarantor in relation to the loan of the borrower will be equivalent to the amount of the

difference between the value of the mortgage collateral and the outstanding loan amount. Consequently, the lender’s

right to collect from the guarantor is limited to the amount of the difference. If the outstanding balance of the loan is

less than the value of mortgage property, then guarantors are released from their obligations.

According to an amendment passed, all unfair clauses will be erased from the amount of the loan which is payable.

In addition, the financial institution will not be able to take judicial or other measures against the guarantor, in case

that his assets, excluding his primary residence, do not exceed €750.000 and at the time of signing the guarantee

agreement accepted responsibility up to €250.000 (loans mortgaged by the primary residence of the debtor) or upon

application of the law, would be liable under the terms of the guarantee agreement for the loan balance up to €250.000.

The regulation applies to loans that are categorized as non-performing loans on the date that the law was enforced.

According to an amendment to The Bankruptcy Law, the bankrupt is rightfully restored upon completion of three

years from the date that the bankruptcy order was issued. Specifically, for borrowers who own or not any immovable

property, but who are unable to repay their debt, is expected that they will no longer be assumed as bankrupt and will

be released from the remaining debts. The bankrupt will be released at the end of a period of three years starting from

the date which the bankruptcy process has started, provided that the bankrupt will be cooperative and will work in

good faith.



105

50. Events after the reporting period (continued)

In addition, with the amendment of the Companies Act the compulsory liquidation process is being updated, while a

restructuring mechanism regarding the debt of a company is established, as well as the preservation and restoration

of the business activity of a company in order to maintain viable businesses. Based on the law, an independent

licensed professional (insolvency consultant) will be appointed, namely the examiner, who will submit compromise

proposals or settlement plan for consideration by the creditors and shareholders of the company and will be confirmed

by the court.

The last regulation of the insolvency framework establishes and regulates the Insolvency Consultant profession and,

specifically, provides the procedure and conditions for the recognition of professional bodies, responsible for licensing

and supervising Insolvency Consultants as well as the procedure and conditions required for their licensing.

Documents

COOPERATIVE CENTRAL BANK LTD · CCB is the main shareholder of the 18 Cooperative Credit Institutions (“CCIs”) while exercising control over companies with trading activities