COOPERATIVE CENTRAL BANK LIMITED Committee of Cooperative Central Bank Limited (the ''Bank'')...

COOPERATIVE CENTRAL BANK

LIMITED

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2013

COOPERATIVE CENTRAL BANK LTD

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS


CONTENTS PAGE

Officers and professional advisors 1

Report of the Committee 2 - 3

Independent Auditors' report 4 - 6

Consolidated statement of profit or loss and other comprehensive income 7

Consolidated statement of financial position 8

Consolidated statement of changes in equity 9 - 10

Consolidated statement of cash flows 11 - 12

Notes to the consolidated financial statements 13 - 87


1

OFFICERS AND PROFESSIONAL ADVISORS

Committee: Georgios Iosif - Non-Executive Chairman (until 25 October 2013)

Nicolas Hadjiyiannis - Independent Non-Executive Chairman (member from 25 October 2013,

chairman from 8 November 2013)

Charalambos Christodoulides - Independent Non-Executive Vice Chairman (from 25 October 2013)

Demetrios Stavrou - Non-Executive Member (until 25 October 2013)

Yiannakis Yiannaki - Non-Executive Member (until 25 October 2013)

Georgios Marinou - Non-Executive Member (until 25 October 2013)

Demetris Christou - Non-Executive Member (until 25 October 2013)

Pavlos Theodotou - Non-Executive Member (until 25 October 2013)

Dr. Nearchos Ioannou - Non-Executive Member (until 25 October 2013)

Mikis Neophytou - Non-Executive Member (until 25 October 2013)

Michalis Papageorgiou - Non-Executive Member (until 25 October 2013)

Demetris Theodotou - Non-Executive Member (until 25 October 2013)

George Hadjinicolas - Non-Executive Member (until 25 October 2013)

Dr. Andreas Charitou - Independent Non-Executive Member (until 25 October 2013)

Dr. Gregoris Maliotis - Independent Non-Executive Member (until 25 October 2013)

Athanasios Stavrou - Independent Non-Executive Member (until 25 October 2013)

Georgios Kittos - Independent Non-Executive Member (until 25 October 2013)

Panicos Pouros - Independent Non-Executive Member (until 25 October 2013)

George Strovolides - Independent Non-Executive Member (reappointed on 7 November 2013)

Lambros Pieri - Independent Non-Executive Member (reappointed on 7 November 2013)

Erotokritos Chlorakiotis - Executive Member (until 18 September 2013)

Stavros Iacovou - Executive Member (from 8 November 2013 until 15 January 2014)

Marios Klerides - Executive Member (from 22 January 2014)

Efthymios Pantazis - Executive Member (reappointed on 22 January 2014)

General Manager: Erotokritos Chlorakiotis - (until 18 September 2013)

Efthymios Pantazis - (Deputy General Manager from 19 September 2013 until 10 January 2014)

Marios Klerides - (from 11 January 2014)

Senior Management: Efthymios Pantazis - Senior Director of Banking services

Stavros Iacovou - Manager Administrative Services

Costas Araouzos - Manager Finance

Demetris Koulas - Manager Financial Services

Independent Auditors: KPMG Limited

Certified Public Accountants and Registered Auditors

14 Esperidon Street

1087 Nicosia

Cyprus

Legal Advisors: Tassos Papadopoulos & Associates

Christos M. Triantafillides in cooperation with Ioannis Klerides & Sons

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


REPORT OF THE COMMITTEE

2

The Committee of Cooperative Central Bank Limited (the ''Bank'') presents to the members its Annual Report

together with the audited consolidated financial statements of Cooperative Central Bank Limited that include the

eighteen Cooperative Credit Institutions (“CCIs”) and the twelve Companies of Commercial Sector which are

controlled, the ‘Group’, for the year ended 31 December 2013.

Incorporation

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

under Article 11 of the Cooperative Companies Law of 1923 and 1937.

Principal activities

The principal activities of the Group, which have not changed from prior year, is the provision of banking and

financial services, within the legal framework of the Cooperative Companies Law and the carrying out of

agricultural trading activities. All activities are carried out in Cyprus.

Review of development regarding the position and review of the results of the Group

The profit from ordinary activities before the provisions for impairment increased by 18,9% and amounted to €

195.680 thousands compared to € 164.531 thousands for 2012. The increase of profit is attributable mainly to the

increase in net interest income. After the charge for impairment of securities of € 16.900 thousand, the increase in

the provision for impairment of loans and other advances of € 1.868.796 thousands, and the tax charge of € 3.200

thousands, a loss for the year of € 1.697.694 thousands was generated compared to a loss of € 17.357 thousands for

2012. The significant increase in the loss is attributable mainly to the increase in the provision for impairment of

loans and other advances as a result of the negative economic climate, the increase of non-performing loans and the

continued decline in property values.

Deposits and other customer accounts as at 31 December 2013 amounted to € 13.477.149 thousands showing a

decrease of € 1.723.242 thousands or 11.3%. Loans and other advances to customers after provisions on 31

December 2013 amounted to € 10.778.140 thousands showing a decrease of € 2.468.274 thousands or 18.6%. The

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

programme amounted to € 1,2 billions and the Core Tier Capital ratio to 12.1%.

Indicative consolidated financial position which includes the amount of recapitalization of € 1,5 billions is included

in note 7 of the financial statements.

Restructuring plan and strengthening of the capital base of CCS

The Cooperative Central Bank Limtied prepared a Restructuring Plan for the Cooperative Credit Sector ("CCS")

that was approved on 24 February 2014 by the European Commission. The European Commission (“EC”) states

that the measures for the recapitalization and restructuring of CCIs, are in accordance with the EU rules for

government support. The main objectives of the Restructuring Plan are:

Regaining the confidence of depositors

Decrease of operating costs and improvement of profitability

Decrease of Non-Performing Loans

Strengthening of Capital Adequacy

Strengthening the operational framework of Corporate Governance

Merge of CCIs

Downsizing branch network

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

Mechanism signed an agreement between the Ministry of Finance and the Bank for the disbursement of € 1,5 billion

for the recapitalization of the CCS and the transfer of 99% of the CCS shares to the Goverment.


REPORT OF THE COMMITTEE

3

Total net income

The Group's total net income for the year ended 31 December 2013 was €398.951 thousands (2012: €376.362

thousands).

Dividends

The Committee does not recommend the payment of a dividend.

Future developments

As presented in notes 1.2, 3.8-3.14 the Group’s Committee, despite of the difficult conditions that exist in the

financial sector and the ongoing recession of the economy, assures its members that will continue its efforts for the

smooth operation of both the Bank and the CCIs. Particular emphasis is given to the strict compliance of the

Restructuring Plan with the aim of strengthening the indicators of capital adequacy, ensuring a healthy liquidity

position and an effective credit risk management.

Main risks, uncertainties and risk management

The main risks and uncertainties faced by the Group and CCIs are credit risk, market risk and liquidity risk. The

Group has established a risk management framework, where prime position is held by the reliable measurement of

financial risks. The steps taken to manage these risks, are described in more detail in note 50 of the consolidated

financial statements.

Share capital

There were no changes in the share capital of the Bank during the year.

Committee

The members of the committee during the year and at the date of this report are shown on page 1. Messrs Nicolas

Hadjiyiannis, Demetris Theodotou, George Hadjinicolas, Charalambos Christodoulides, Athanasios Stavrou, George

Kittos and Panicos Pouros were appointed on 25 October 2013. Messrs George Strovolides and Lambros Pieri were

reappointed on 7 November 2013 and Efthymios Pantazis was reappointed on 22 January 2014. On the same day

Marios Clerides was appointed as a member of the Committee.

In accordance with the Specific Rules of the Bank all present members of the Committee continue in office.

Events after the reporting period

Events after the reporting period that ended 31 December 2013 until the date of approval of the consolidated

financial statements are mentioned in note 54 of the consolidated financial statements.

Related party transactions

Disclosed in note 48 of the consolidated financial statements.

Independent Auditors

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

By order of the Committee,

Chairman

Nicosia, 30 June 2014

4

Independent Auditors’ Report

To the Members of

Cooperative Central Bank Limited

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

We have audited the accompanying consolidated financial statements of Cooperative Central Bank Limited (the

''Bank'') and its subsidiaries (together with the Bank, ''the Group'') on pages 7 to 87 which comprise the consolidated

statement of financial position as at 31 December 2013, and the consolidated statement of profit or loss and other

comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant

accounting policies and other explanatory information.

Committee's responsibility for the consolidated financial statements

The Committee is responsible for the preparation of consolidated financial statements that give a true and fair view

in accordance with International Financial Reporting Standards as adopted by the European Union, and the

requirements of the Cooperative Companies Law of 1985 as amended from time to time, and for such internal

control as the Committee determines is necessary to enable the preparation of consolidated financial statements that

are free from material misstatement, whether due to fraud or error.

Auditors' responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We

conducted our audit in accordance with International Standards on Auditing. Those Standards require that we

comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the

consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the

risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making

those risk assessments, we consider internal control relevant to the entity’s preparation of consolidated financial

statements that give a true and fair view in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of

accounting estimates made by the committee, as well as evaluating the overall presentation of the consolidated

financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for a qualified opinion for our audit.

5

Basis for qualified opinion regarding the consolidated financial performance and the consolidated cash flows

Due to limitations placed on the extent of our work, we were unable to complete the procedures required by the

International Auditing Standards (“ISA”) 510 "Initial Audit Engagements – Opening Balances" and ISA 710

"Comparative Information - Corresponding Figures and Comparative Financial Statements" so as to have sufficient

and appropriate audit evidence as to the total assets and total liabilities of the Group as at 1 January 2013, and the

corresponding amounts as at 31 December 2012. Since the opening balances of assets and liabilities of the Group

affect the determination of financial performance and its cash flows for the year, we were unable to determine any

adjustments that might be necessary in relation to the profit / loss for the year ended 31 December 2013 that is

presented in the consolidated statements of profit or loss and other comprehensive income and changes in equity,

and in relation to the net cash flows presented in the consolidated statement of cash flows for respective year and

any adjustments to the corresponding amounts for 2012.

Qualified opinion regarding the consolidated financial performance and its consolidated cash flows

In our opinion, except for the effects of the matters mentioned in the paragraph of the basis for qualified opinion, the

consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the

year ended 31 December 2013 give a true and fair view of the financial performance and cash flows of the Group

for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European

Union, and the requirements of the Cooperative Companies Law of 1985 as amended from time to time.

Opinion regarding the consolidated financial position

In our opinion, the consolidated statement of financial position gives a true and fair view of the financial position of

the Group as at 31 December 2013, in accordance with International Financial Reporting Standards as adopted by

the European Union, and the requirements of the Cooperative Companies Law of 1985 as amended from time to

time.

Report on other legal requirements

Pursuant to the additional requirements of the Auditors and Statutory Audits of Annual and Consolidated Accounts

Laws of 2009 as amended from time to time, we report the following:

We have obtained all the information and explanations we considered necessary for the purposes of our

audit, except that the scope of our work was limited by the matters referred to in the paragraph of the basis

for qualified opinion.

In our opinion, proper books of account have been kept by the Bank so far as it appears from our

examination of these books, except as stated in the basis for qualified opinion paragraph.

The consolidated financial statements are in agreement with the books of account.

In our opinion and to the best of our information and according to the explanations given to us, the

consolidated financial statements give the information required by the Cooperative Companies Law 1985 as

amended from time to time, in the required manner except as stated in the basis for qualified opinion

paragraph.

In our opinion, the information given in the report of the Committee on pages 2 to 3 is consistent with the

consolidated financial statements.

6

Other matter

This report, including the opinion, has been prepared for and only for the Bank’s members as a body in accordance

with Section 34 of the Auditors and Statutory Audits of Annual and Consolidated Accounts Laws of 2009 as

amended from time to time and for no other purpose. We do not, in giving this opinion, accept or assume

responsibility for any other purpose or to any other person to whose knowledge this report may come to.

Comparative figures

The comparative figures have not been audited.

Michael M. Antoniades, FCA

Certified Public Accountant and Registered Auditor

for and on behalf of

KPMG Limited

Certified Public Accountants and Registered Auditors

14 Esperidon Street

1087 Nicosia

Cyprus

30 June 2014


The notes on pages 13 to 87 form an integral part of these consolidated financial statements.

7

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


2013 2012

Note

€'000 €'000

Interest income 9 886.912 918.617

Interest expense 10 (475.182) (580.700)

Net interest income 411.730 337.917

Income from fees and commissions 36.710 38.571

Expenses for fees and commissions (1.899) (3.585)

Other net losses 11 (28.306) (3.695)

Fair value loss on investment properties 27 (32.734) (11.707)

Other income 12 13.450 18.861

Total net income 398.951 376.362

Staff costs 13 (125.633) (127.410)

Depreciation 15 (13.785) (14.275)

Other operating expenses 16 (63.853) (70.146)

Total expenses (203.271) (211.831)

Operating profit before provisions for impairment 195.680 164.531

Net finance costs 17 (252) (184)

Share of results of associates before tax 31 8 19

Charge for impairment in value of investments held to maturity 26 (16.900) (2.000)

Charge for impairment of financial assets available for sale 25 (4.234) (149)

Increase in provisions for impairment of loans and other advances 21 (1.868.796) (173.963)

Loss before tax (1.694.494) (11.746)

Tax 18 (3.200) (5.611)

Net loss for the year (1.697.694) (17.357)

Other comprehensive income

Items that will not be reclassified in subsequent periods to profit or loss:

Change in the fair value of land and buildings

(22.242) (8.756)

Tax on other comprehensive income 18 (356) 79

(22.598) (8.677)

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

Available for sale financial assets - Fair value gains 25 3.360 2.271

3.360 2.271

Other comprehensive expense for the year (19.238) (6.406)

Total loss for the year (1.716.932) (23.763)



8

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December 2013

2013 2012

Note €'000 €'000

ASSETS

Cash 100.837 92.537

Deposits with central banks 19 959.275 1.167.391

Deposits with other banking institutions 20 64.133 100.969

Loans and other advances to customers 21 10.778.140 13.246.414

Inventories 22 44.676 49.078

Properties held for sale 23 83.321 59.253

Financial assets at fair value through profit or loss 24 202 148

Available for sale financial assets 25 24.825 13.034

Investments held to maturity 26 1.017.476 1.733.797

Investment properties 27 254.990 296.068

Property, plant and equipment 28 331.864 358.595

Intangible assets 29 1.685 2.343

Investments in associates 31 208 213

Other assets 32 46.959 49.750

Total assets 13.708.591 17.169.590

LIABILITIES

Amounts due to other bank institutions 33 83.600 81.004

Deposits and other customer accounts 34 13.477.149 15.200.391

Repurchase agreements 35 202.581 201.458

Other loans 36 74.206 74.275

Loans for the repayment of refugee deposits 37 36.534 36.534

Loan capital 38 - 20.110

Deferred income 39 90 98

Other liabilities 40 127.534 131.637

Total liabilities 14.001.694 15.745.507

EQUITY

Share capital 44 100.836 100.836

Reserves 45 (393.939) 1.323.247

Total equity (293.103) 1.424.083

Total equity and liabilities 13.708.591 17.169.590

Contingent liabilities and commitments 47 672.264 801.863

On 30 June 2014, the Committee of Cooperative Central Bank Limited 8uthorized these consolidated financial

statements for issue.

….................................

….................................

….................................

….................................

Chairman Vice Chairman General Manager Finance Manager

The indicative consolidated statement of financial position that includes the amount of recapitalization of €1,5

billion which results in equity of €1,2 billion is presented in note. 7.



9

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

Profit

available for

distribution Total

Note €’000 €’000 €’000 €’000 €’000 €’000 €’000

Balance – 1 January 2012 97.855 196.706 (9.444) 38.980 1.119.311 - 1.443.408

Comprehensive income

Net loss for the year - - - - - (17.357) (17.357)


Fair value reserve – land and buildings

Fair value gains – net of tax 28&42 - (8.112) - - - - (8.112)

Fair value reserve – available-for-sale financial assets

Fair value adjustment 25 - - 2.271 - - - 2.271

Provison for charity purposes - - - - 746 - 746

Other comprehensive income for the year - (8.112) 2.271 - 746 - (5.095)

Transactions with owners

Issue of share capital 44 2.981 - - - - - 2.981

Increase in merger reserve - - - 146 - - 146

Transfer of loss for the year - - - - (17.357) 17.357 -

2.981 - - 146 (17.357) 17.357 3.127

At 31 December 2012 100.836 188.594 (7.173) 39.126 1.102.700 - 1.424.083

COOPERATIVE CENTRAL BANK LTD CONSOLIDATED STATEMENT OF CHANGES IN EQUITY



10

Share

Capital

Fair value

reserve-

land and

buildings

Fair value

reserve –

available-for-

sale financial

assets

Merger

reserve

Statutory

reserve

required by

law

Profit

available for

distribution Total

Note €’000 €’000 €’000 €’000 €’000 €’000 €’000

Balance 1 January 2013 100.836 188.594 (7.173) 39.126 1.102.700 - 1.424.083

Comprehensive income

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


Fair value reserve - land and buildings

Fair value gains - net of tax 28&42 - (21.886) - - - - (21.886)

Fair value reserve - available-for-sale financial assets

Fair value adjustment 25 - - 3.360 - - - 3.360

Provison for charity purposes 40 - - - - (1.758) - (1.758)

Other comprehensive income for the year - (21.886) 3.360 - (1.758) - (20.284)

Transactions with owners

Increase in merger reserve - - - 792 - - 792

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

- - - 792 (1.697.694) 1.697.694 792

At 31 December 2013 100.836 166.708 (3.813) 39.918 (596.752) - (293.103)



11

CONSOLIDATED STATEMENT OF CASH FLOWS


2013 2012

Note €'000 €'000

Cash flows from operating activities

Loss before tax (1.694.494) (11.746)

Adjustments for:

Provision for impairment of loans and other advances to customers 21 1.868.796 173.963

Depreciation of property, plant and equipment 28 12.859 12.811

Amortization of computer software 29 922 1.459

Amortization of rights for use 29 4 5

Share of loss/(profit) and write offs from associates 31 4 (19)

Loss from disposal of property, plant and equipment 28 77 128

Fair value losses on investment properties 27 32.734 11.707

Fair value gains on financial assets at fair value through profit or loss 24 (49) (32)

Impairment charge on financial assets available for sale 25 4.234 149

Impairment charge on investments held to maturity 26 16.900 2.000

Impairment charge on investment properties 11 2.654 1.205

Impairment charge on available for sale properties 23 17.813 2.255

Impairment charge on property, plant and equipment 28 7.867 174

(Credit) in results for employee retirement plans 43 (4.077) -

Debit/(credit) in results for provisions for other liabilities and charges 43 216 (292)

Income from investments in treasury bills 9 (450) (2.212)

Income from investments in debt securities 9 (57.800) (70.392)

Dividend expense (23) (336)

Interest income 11 (56) (35)

Interest expense 17 33 34

Cash flows from operating activities before working capital changes 208.164 120.826

Decrease in deposits with central banks - 168.693

Decrease / (increase)in deposits with other banking institutions 10.315 (146.004)

Decrease in loans and other advances to customers 599.478 -

Increase / (decrease) in repurchase agreements 1.123 (98.575)

Decrease in inventories 4.402 7.403

(Increase) / decrease in properties held for sale (22.791) 35.632

Decrease in other assets 15.330 -

Increase in financial assets at fair value through profit or loss (5) (20)

Decrease in customer deposits and other customer accounts (1.723.738) (684.206)

Decrease in other liabilities (4.852) -

Decrease in deferred income (8) -

Cash flows used in operating activities (912.582) (596.251)

Tax (paid)/ refunded (4.955) 6.677

Payment for employee retirement schemes (1.210) (16.483)

Net cash flows used in operating activities (918.747) (606.057)


CONSOLIDATED STATEMENT OF CASH FLOWS



12

Cash flows from investing activities

Income from investments in treasury bills 9 450 2.212

Income from investments in debt securities 9 57.800 70.392

Payment for acquisition of intangible assets 29 (268) (1.073)

Payment for acquisition of property, plant and equipment 28 (30.477) (29.547)

Payment for acquisition of investment properties 27 (4.650) (2.945)

Payment for acquisition of available for sale financial instruments 25 (12.665) (7.904)

Payment for acquisition of investments in subsidiaries 30 - 513

Payment for acquisition of investments in associates 31 - (196)

Proceeds from disposal of property, plant and equipment 28 2.289 28

Proceeds from disposal of investment properties 27 556 -

Proceeds from disposal of investments held-to-maturity 26 699.421 412.710

Interest received 56 35

Dividends received 23 336

Net cash flows from investing activities 712.535 444.561

Cash flows from financing activities

Proceeds from issue of share capital 44 - 2.981

Repayments of loan capital 38 (20.110) -

Interest paid (33) (34)

Net cash flows (used in) / from financing activities (20.143) 2.947

Net decrease in cash and cash equivalents (226.355) (158.549)

Cash and cash equivalents at beginning of the year 1.196.056 1.354.605

Cash and cash equivalents at end of the year 46 969.701 1.196.056

COOPERATIVE CENTRAL BANK LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


13

1. General

1.1 Incorporation

The Bank was founded in Cyprus in 1937 (registration number 88) as Cooperative limited liability company in

accordance with Article 11 of the Cooperative Companies Law of 1923 and 1937. Its registered office is located at 8

Grigori Afxentiou street, 1096 Nicosia, P.O. 24537, 1389 Nicosia.

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

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

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

mergers on September 2013. On 4 October 2013 the nationalization decree of the Cooperative was issued along with

the increase of the share capital to € 1.5 billions. The agreement for the granting of the debenture issued by the

European Stability Mechanism for recapitalization of the Cooperative Movement was signed on 28 February 2014.

In accordance with the Restructuring Plan, the Memorandum and the two government decrees issued on 4 October

2013 and 29 January 2014, the participation percentage of the voting rights of the Republic of Cyprus in the

ownership structure of Cooperative Central Bank (“CCB”) is 99% and of the existing shareholders is 1%. At the

same time, CCB becomes a 99% shareholder in the remaining 18 Cooperative Credit Institutions.

1.2 Public finance adjustment program and operating environment

On 25 March 2013 the negotiations between the Cyprus government and Eurogroup have been concluded, and an

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

and the development of a macroeconomic adjustment program. From the €10 Billions, €2.5 billions will be available

for the re-capitalisation of the bank institutions of Cyprus, including the Cooperative Sector, but excluding Bank Of

Cyprus Plc (“Bank of Cyprus”) and Laiki Bank Plc (“Laiki”).

Furthermore, it was decided that Bank of Cyprus and Laiki will be set under resolution assets, insured deposits and

the €9 billions provided by Emergency Liquidity Assistance (’’ELA’’) will be transferred from Laiki Bank to Bank

of Cyprus. The recapitalization procedure of Bank of Cyprus was completed in accordance with the relevant decrees

of the Resolution Authority for “Bailing - in” meaning a partial conversion of the unsecured deposits into shares.

Moreover, the holders of shares and credit securities of Bank of Cyprus have contributed towards its re-

capitalization through the absorption of losses.

In accordance with the text of the economic adjustment program the target is to overcome both the short-term and

the medium-term economic, financial and structural challenges that Cyprus is facing. The main aims of the program

are:

1. to restore the strength of the Cyprus banking sector and to gain the trust of the depositors and the market

with the thorough restructuring and downsizing of the financial institutions, the strengthening of

supervision and to address the expected capital deficiencies, in accordance with the political agreement of

the Eurogroup on the 25 March 2013,

2. to continue the current process of restructuring the public finances in order to correct the excessive

government budgetary deficit, as soon as possible, especially through measures to decrease the current

primary expenditure, and by maintaining, medium term, the restructuring of the public finances, especially

through measures to increase the productivity of the public expenditure within a short-term public finances

framework, to increase the collection of income and to improve the operation of the public sector, and

3. to implement corrective reforms in order to support the competitiveness and a sustainable and balanced

development, allowing the correction of the macroeconomic imbalances, and more specific through the

reform of the system of cost of living allowance and the removal of obstacles for the ordinary functioning

of the services markets.



14

1. General (continued)

1.2 Public finances adjustment program and operating environment (continued)

The final text of the Memorandum of Understanding with Troika was agreed from the Board of Directors of the

European Stability Mechanism and the Cyprus Parliament and approved by the member states of the eurozone.

On 27 March 2013 the first decree was issued concerning the restrictions on the banking transactions. The scope and

duration of the restrictions are decided and revised by the Ministry of Finance and the Governor of the Central Bank

of Cyprus. The temporary restrictions on the bank transactions and cash transactions include restrictions on the

withdrawals of cash, the clearing of cheques and restrictions of money transferred on other credit institutions in

Cyprus and abroad.

On 29 March 2013, the Central Bank of Cyprus issued two decrees in relation to the Laiki and Bank of Cyprus,

implementing measures for these two banks as per The Resolution of Credit and Other Institutions Law of 2013.

On 18 April 2013, legislation was approved by the Parliament that allowed for increase of the Corporation tax from

10% to 12,5%, increasing the special contribution for defence from 15% to 30% as well as increasing the special tax

relating to credit institutions from 0,11% to 0,15%.

The Central Bank of Cyprus announced on the 24 April 2013 that an agreement was reached with the banking

institutions in Cyprus, that provides that if the deposit rate offered by the financial institutions exceeds euribor plus

300 basis points, then the financial institution must maintain additional special capital.

On 2 May 2013, the Cyprus bonds have regained the ability to be used as a collateral for the purpose of funding

from the European Central Bank, while on 13 May 2013 the European Stability Mechanism announced the decision

of its Board of Directors to release the first installment of €3 billions from the support package given to Cyprus and

the deposit of the initial €2 billions.

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

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

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

that covers the provisioning policy of loans and the procedures for provisions. The Decree starts with an immediate

effect and the disclosure requirements must be applied for the year 2013.

The reform of the legal framework regarding repossession and insolvency is of high importance, so that balanced

motives will be given to borrowers and lenders to negotiate and reach to an agreement regarding the restructuring of

the non-performing loans, avoiding at the same time difficult situations.

The completion of the evaluation is subject to an approval from the European Union and the International Monetary

Fund (IMF) and is expected to be reviewed from the Eurogroup, the board of directors of the European Stability

Mechanism and the executive committee of the IMF until the beginning of July.

1.3 Principal activities

The main activities of the Group, which have remained the same as the previous year, is the provision of banking

and financial services, in accordance with the legislation of Cooperative Companies and the performance of trading

activities. All activities are carried out in Cyprus.

1.4 Turnover

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



15

2. Basis of preparation

2.1 Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting

Standards (IFRSs) as adopted by the European Union (EU) and the provisions of the Cooperative Companies Laws

of 1985.

2.2 Functional and presentation currency

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

amounts presented in the financial statements are rounded to the nearest thousand unless when stated otherwise. The

functional currency is the currency of the primary economic environment in which the Group operates and in which

the elements of financial statements are measured.

2.3 Basis of measurement

The consolidated financial statements have been prepared under the historical cost convention, as amended with the

fair value estimate of land and buildings, investment properties, financial assets available for sale and the financial

assets at fair value through profit or loss.

2.4 Going concern basis

The consolidated financial statements have been prepared on a going concern basis. Despite the recent

developments in the economic environment of Cyprus, as stated in notes 1.2 and 3.8 until 3.14 of the consolidated

financial statements, the Management and the Committee of the Group have been satisfied on the basis of the

analysis in note 3.15 ,that the Group, has the means to continue its operations in the foreseeable future.

3. Use of estimates and judgments

The preparation of consolidated financial statements in accordance with IFRs requires from Management the

exercise of judgement, to make estimates and assumptions that influence the application of accounting principles of

the Group and the related amounts of assets and liabilities, disclosure of contingent liabilities and commitments as at

the date of preparation of the financial statements as well as the amounts of income and expenses. Despite the fact

that these calculations are based on the best knowledge of Management of the Bank in relation to current conditions

and actions, actual results may deviate from such estimate.

The estimates and underlying assumptions are revised on a continuous basis. Revisions in accounting estimates are

recognized in the period during which the estimate is revised, if the estimate affects only that period, or in the period

of the revision and future periods, if the revision affects the present as well as future periods.

The estimates and assumptions that have a significant risk for material adjustments within the next financial year are

presented below.

3.1 Impairment of financial assets

Assets which are presented at amortised cost are evaluated for impairment based on the explanation in note 6.22.

The loss for assets which are evaluated individually is based on the best possible estimates of the management for

the present value of the estimated future cash flows that are expected to be received. For determining these cash

flows, the management exersises its judgements about a debtor’s financial situation and the net realizable value of

any underlying collateral.



16

3. Use of estimates and judgments (continued)

3.1 Impairment of financial assets (continued)

Impairment provision is also estimated collectively for assets that have been evaluated individually and have not

demonstrated any impairment, (incurred but not recorded) and for advances with homogenous characteristics that

have not been assessed as significant on an individual basis.

The provision for losses that have been incurred but not recorded covers the credit losses that are inherent in loans,

and investments held to maturity when there is an objective evidence that demonstrates that there are impaired

assets but these assets have not been identified.

In the evaluation for the need for collective provision, the management takes into account factors, such as the

solvency, the size of the portfolio and other economic factors. The management also uses assumptions on the

estimation of the provision based on prior experience and the current financial position. The accuracy of the

provision is contingent on the assumptions and parameters of the model that is used to determine the provision.

The Group grants loans and other facilities to customers, that are secured by guarantees of the Republic of Cyprus.

The Group does not recognize any other impairment provision due to the government guarantees. This decision of

the Group requires the exercise of significant judgment. Based on the existing information, the Group believes that

it has fulfilled all of its obligations from the current agreements with the Government and as a result it has not

recognized any provision for this category of loans.

Investments in shares are tested for impairment as explained in note 6.22. Significant or prolonged reduction in the

fair value below the costs of investments on shares is considered as objective evidence for impairment.

Investments in government bonds are tested for impairment, taking into account the solvency that is reflected on the

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

markets, as well as whether the state has used support mechanisms for financial support.

Investments in bonds held to maturity are subject to impairment when their book value exceeds their recoverable

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

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

of the issuer,the breach of contract conditions and the possibility of bankruptcy of the issuer.

3.2 Fair value estimation

The fluctuations that exist in the real estate market and the reduction in the volume of transactions have significantly

increased the uncertainty for the right estimation of the fair value of properties. Properties that the Group has for its

own use is measured at fair value less accumulated depreciation and accumulated impairment losses. The fair value

is determined from the estimation of professional surveyors, based on market indications about their current use are

take place on a regular basis, so that the book value is not substantially different from the fair value.

The investment properties owned by the Group is measured at fair value. The fair value is determined from the

estimations of professional surveyors, based on indications of the market about their current use at the end of each

year.

The fair value of the financial instruments that are not traded in the active market is determined from valuation

models. These models are reassessed periodically by specialised personnel that reconfirms their credibility. To the

greater extent possible, the valuation models are based on observable market inputs, but also on factors such as the

identification of credit risk and the volatility requiring estimations and judgments by the management. Changes in

these estimations and assumptions are likely to affect the fair value of the relevant financial instruments.



17


3.3 Income taxes

Significant judgment is required in determining the provision for income taxes. There are transactions and

calculations for which the final tax computation is uncertain during the ordinary course of business. The Bank

recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. In

cases where the final tax outcome of these matters is different from the amounts that were initially recorded, such

differences will impact the income tax and deferred tax provisions in the period in which such determination is

made.

3.4 Provision for obsolete and slow-moving inventories

The Bank reviews its inventories for evidence regarding the ability to the sell inventories and their net realizable

value on disposal. The provision for obsolete and slow-moving inventory is based on management’s past

experience, taking into consideration the value of inventories as well as the movement and the level of stock of each

category of inventory.

The amount of provision is recognized in profit or loss. The review of the net realisable value of the inventories is

continuous and the methodology and assumptions used for estimating the provision for obsolete and slow moving

inventories are reviewed regularly and adjusted accordingly.

3.5 Fair value of non listed treasury bills, equity securities, debt securities and derivative financial

instruments

The fair value of treasury bills, equity securities, debt securities and derivative financial instruments that are not

quoted in an active market, is determined using valuation models. These models are periodically reviewed by

qualified personnel and validated. To the greatest extent possible, models use observable data, as well as factors

such as the determination of credit risk and volatility that require management to make estimates and assumptions.

Changes in these estimates and assumptions could affect the fair value of the relevant financial instruments.

3.6 Retirement benefits

The cost of defined benefit pension plans is determined using actuarial valuations that use assumptions about

discount rates, long term rate of return on plan’s assets, future salary increases, mortality rates and future retirement

benefit increases where necessary. The Group sets these assumptions based on market expectations at the reporting

date using best estimates for each parameter, covering the period over which obligations will be settled. Due to the

long-term nature of these plans, such assumptions are subject to significant uncertainty.

3.7 Impairment of intangible assets

The intangible assets are recognised initially at cost and are depreciated using the straight line method during their

useful economic life. For the intangible assets arising from merger of companies, the cost of acquisition is the fair

value at the date of the transaction. The intangible assets with unlimited use are reviewed for impairment at least

once a year. This review is performed by discounting all future cash flows expected to arise from the use of the

intangible assets, using a discount rate reflecting the current estimations of the market and the risks related to the

asset. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the

recoverable value of the cash generating unit in which the asset belongs to.

3.8 Cooperative Sector Restructuring Plan

On 14 June 2013 the Central Bank of Cyprus announced after a discussion with Troika that the final requirements of

the Cooperative Credit Institutions amounted to €1.5 billions. On 5 September 2013 the Parliament approved the

legislation regarding the supervision and nationalization of the Cooperative Sector.

During September 2013, General Meetings of the Members of the 93 Cooperative Credit Institutions were held and

approved the mergers as provided in the Restructuring Plan therefore reducing the CCIs number to 18.



18


3.8 Cooperative Sector Restructuring Plan (continued)

On 27 September 2013 the European Stability Mechanism announced the deposit of €1.5 billions to Cyprus, an

amount intended for the recapitalization of the Cooperative Credit Sector.

On 4 October 2013 the decree of nationalization of Cooperative Sector was issued. According to the decree, the

share capital of the Cooperative Central Bank (CCB) increases by €1.5 billions with the issue of new shares, which

are subscribed in full by the Republic of Cyprus with the provision of a bond of equivalent nominal value from the

European Stability Mechanism to CCB. The bond has a duration of 18 months, and it could either be renewed or

exchanged at its maturity date with cash. The enforcement of the decree is under the final approval of the

Cooperative Restructuring Plan from the Directorate General of Competition of the European Union.

According to the amended decree which was published in the official qazette of the Republic of Cyprus on 29

January 2014 and according to the valuation report of CCB’s shares which was performed by an independent firm,

the participation percentage and voting rights of the Republic of Cyprus in the ownership structure of CCB is ninety

nine percent (99%) and of the existing shareholders of CCB is one percent (1%). In this respect the Cooperative

Holding Company of CCB is incorporated to which all existing shareholders of CCB are transferred with

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

nominal value of the shares equals to one euro and twenty eight cents (€1,28) per share, according to the decree

specific deductions were made to the payroll of the Bank.

On 24 February 2014 the European Committee proceeded with the approval of the Cooperative Restructuring Plan.

The recapitalization and restructuring measures of the CCIs conform to the EU rules for state aid, as stated by the

European Committee which approved the Restructuring Plan of CCIs. On 24 March 2014 all merger procedures are

completed. Main objectives of the Restructuring plan other than the mergers are:

Regaining the confidence of depositors

Decrease of operating costs and improvement of profitability

Decrease of Non-Performing Loans

Strengthening of Capital Adequacy

Strengthening the operational framework of Corporate Governance

Downsizing of branch network

On 28 February 2014, the agreement between the Ministry of Finance, Cooperative Central Bank and European

Stability Mechanism was signed for the deposit of €1,5 billions for the recapitalization of the Cooperative Sector

and the transfer of its shares to the State.

3.9 Macro-economic environment in Cyprus

The progress of the adjustment program of the Cypriot economy has been assessed four times by Troika, and all

assessments were positive. After the update of the Memorandum of Understanding in May of 2014 the minimum

capital adequacy ratio of banks returns to 8%. According to Troika, following the fourth assessment, the program of

Cyprus remains on track while the financial targets for the first quarter of 2014 have been achieved.

The three most important challenges are the decrease of non-performing loans, maintaining the public finances in a

sustainable path and the completion of reforms. As part of the restructuring plan of Cyprus, the government has

committed to promote legislation that would ease the foreclosure of mortgages on loans of major debtors.

Progress has been recorded regarding the recapitalization and restructuring of the Cooperative Credit Sector and

banks proceed with their restructuring plans. This has allowed a significant loosening of the restrictions in domestic

transactions, in line with the roadmap of the cypriot government.



19


3.9 Macro-economic environment in Cyprus (continued)

The authorities have also adopted measures for the implementation of their ambitious program of structural reforms.

According to Troika, the prospects continue to be challenging despite the fact that the recession is expected to be

lower during the current year. The reduction of the GDP for the year 2014 has been revised to 4,2% from 4,8% due

to the better than expected results of 2014 and other recent indicators which suggest an improvement in trust.

The unemployment remains high and substantial non-performing loans restrict the banks’ ability to provide credit

services to the economy. As a result, it is expected that the recovery will be weaker than what was previously

projected with an increase that is expected to reach 0,4% in 2015 with a gradual improvement in the future, since the

domestic demand is restricted from the need for reduction of the high levels of debt.

Troika believes that the primary fundamental challenge is the effective decrease of non-performing loans, as it is

necessary in order to restart the granting of loans to the private sector for the support of growth and the creation of

new employment opportunities.

3.10 Regulatory Capital Indicators

During the year ended 31 of December 2013, the Group incurred significant losses, due to the substantial increase of

the provision for impairment of loans and other advances.

As part of the agreement between Troika and the Cypriot government on March 2013, the Cooperative Sector was

recapitalized with the issue of a bond from the European Stability Mechanism amounting to €1,5 billion and the

transfer of 99% of the share capital to the Government.

The core tier ratio of the Group on 31 of December 2013 would be 12,6% if the amount of the recapitalization was

accounted for in 2013. The Group aims to maintain its capital adequacy through the non distribution of profits,

while, at the same time, the restructuring and sale of noncore assets will be determined based on the risk reduction

and the capital adequacy.

From 1 January 2014, the new Capital Requirements Regulations (“CRR”) and the amended Capital Requirements

Directive IV (“CRD IV”) are in force. The Central Bank of Cyprus (“CBC”) evaluates the choices for the

implementation of transitional provisions relating to the decrease of the new indicator of the Common Equity Tier 1

Capital. On the basis of this evaluation, the CBC will set the minimum capital indicators, taking into consideration

the parameters of the evaluation of the consolidated statement of financial position and the Pan-European stress test,

in cooperation with Troika and by informing the European Stability Mechanism.

After its recapitalization, the Group complies with the minimum level for core equity capital ratio. During the year

and until the 31 of December 2013, the Group did not comply with the minimum level for core equity capital ratio.

3.11 Liquidity

The Management and Committee of the Cooperative Sector review on a daily basis the liquidity position of the

Group, which will continue to have access to liquidity facilities of the Central Banks, as per the existing rules, when

it is necessary.

The cypriot authorities have implemented in March 2013, temporary restrictive measures and capital movement

controls on bank and cash transactions. These measures provide the Group with time, in order for it to manage the

significant liquidity pressure in the local market and the risk of deposit outflows. These measures include limits in

cash withdrawals and capital movements. It is noted that the restrictive measures on capital movements within

Cyprus have been lifted in May 2014.

The Cooperative Central Bank is allowed to use liquidity facilities from the Eurosystem up to €1,95 billion

(according to the 31 May 2014 data) using as guarantee governmental bonds and the Eurobond of the European

Stability Mechanism. Additionally, there is the possibility of borrowing from the interbank market using as

guarantee the above bonds from the European Central Bank.



20


3.11 Liquidity (continued)

The Parliament has approved on 27 January 2014 the issue of additional government guarantees up to €2,9 billions

as a possible security in case of emergency. This gives the CCB the opportunity, in case of emergency, to issue a

covered bond as an alternative mechanism of obtaining liquidity. As a final solution, there is the possibility of

accessing the Emergency Liquidity Assistance.

It is noted that the Cooperative Sector is developing a strategy to hold and reinforce its deposit base, while

maintaining access to alternative sources of liquidity.

3.12 Profitability

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

2014, the percentage of the recession is expected to reach 4,2%, whereas in 2015, the GDP is expected to rise

marginally. The high percentage of unemployment is expected to continue to affect negatively the ability of

borrowers to repay their loans. It is also expected that, at least in the foreseeable future, the decline of the turnover

of small and medium enterprises will result in the same negative consequences.

According to the Restructuring Plan, independent, centralised and specialised debt recovery units have been formed,

through which the Group plans to effectively manage the recovery and restructuring of problematic loans, so as to

limit the percentage of problematic loans and provisions for impairment which are expected to arise due to the

economic environment. In addition, the Group proceeds with adopting measures to reduce operating expenses, a

profound example being the reduction in staff costs.

3.13 Stress Test

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

stress tests are going to take place, aiming at the assesment of the European Union’s financial institutions’ resilience

against adverse developments in the markets. The Pan-European test has been planned to provide to the supervisors,

the market competitors and institutions with fixed elements, in order to check and compare the European Union’s

banks’ resistance against adverse developments. As a first step for these tests, an Asset Quality Review is going to

be undertaken. The tests, in which amongst others the Bank of Cyprus, the Cooperative Central Bank, the Hellenic

Bank and the RCB will take part, aim to secure the consistency and comparability of the results of all banks based

on a common methodology and scenario.

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

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

relevant authorities in each country can test the banks to risks relating to the peculiarities of each country. The Pan-

European stress tests results are expected to be announced at about the end of October 2014.

For this reason, the European Banking Authority provides the relevant authorities with a consistent and comparable

methodology, which will allow them to perform a rigorous evaluation of the resiliance of the banks under pressure

conditions.

The test has been planned in coordination with the European Central Bank, which carries out a complete evaluation

within the context of its preparation for the Single Supervisory Mechanism (“SSM”), and includes risk assessment,

asset quality control, and stress tests.

The test will be undertaken for a sample of European Union banks that represent at least 50% of every national

banking sector. The resilience of EU banks will be evaluated for a three-year period (2014-2016). Banks must set

under stress a common list of risks including those of credit risk, market risk, state risk, securitization and costs of

financing.

The conduction of the exercise includes the close cooperation between the European Banking Authority and the

Relevant Authorities in each member state, including the European Central Bank (“ECB”). More specifically, the

European Authority will be responsible for the coordination of the test in cooperation with the ECB and ensuring an

effective collaboration between the internal and external supervisors.



21


3.14 Uncertainties

The Management and the Committee of the Group are not in a position to predict precisely all of the developments

that could influence the Cyprus economy and the Cooperative Sector’s performance in the exercise of the Asset

Quality Review and in the Stress Tests as mentioned above, and as a result, what effect, if any, they could have on

the future financial performance, cash flows, financial position and capital of the Group. Instead, they observe

carefully the financial developments and adopt measures for maintaining the viability of the Cooperative Sector and

the management of the present situation, but also of future possible adverse developments.

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

The progress of the Cypriot economy, the movement of the market values of the real estate in Cyprus and the

capability of borrowers to repay their loan obligations.

The shaping of the international financial environment and especially in markets that affect Cyprus.

The successful implementation of the Restructuring Plan of the Group and the realization of the long term

macroeconomic scenario which formed the basis of its preparation.

The continuing need for maintaining and reinforcing liquidity and the availability of liquidity provision

mechanisms via the Central Bank.

The outcome of the overall evaluation of the ECB, which could reveal additional capital needs for the Group.

3.15 Evaluation of going concern

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

taken for the support of the economy of Cyprus and the implemented and planned actions as they are presented in

the Restructuring Plan, they have been satisfied that the Group has the means of continuing its operations in the

foreseeable future. As a result the financial statements will continue to be prepared on the basis of the going concern

principle for the following reasons:

The Group has been recapitalized successfully, while there is an additional €1 billion available for the

recapitalization of the Cypriot banking system in the support program.

It is anticipated that Troika will continue to supply the necessary financial support to Cyprus in accordance with

the Memorandum.

The implementation of actions according to the Restructuring Plan will further improve the capital adequacy

and liquidity of the Group.

The liquidity indicators following the provision of the recapitalization bond are deemed adequate, while the

Organization maintains access to alternative sources of raising funds.

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

During the current year, the Group adopted all the changes in IFRSs that are relevant to its operations. This adoption

did not have a material effect on the financial statements of the Group except the adoption of IAS 1 (Amendment)

“Presentation of items of Other Comprehensive Income”, where the separation of other total income into two

groups, is required, based on whether in the future it may be transferred to profits and losses of the period or not and

except the adoption of IFRS 13 “Fair Value Measurement” where additional disclosures on fair value measurement

are required.



22

5. IFRS and Interpretations issued but not yet effective

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

for annual periods beginning on 1 January 2013. The Group does not intend to adopt the following standards prior to

their effective date.

(i) Standards and Interpretations adopted by the European Union

IFRS 10 ''Consolidated Financial Statements'' (effective for annual periods beginning on or after 1 January

2014).

IFRS 10 replaces the guidelines as a whole regarding control and consolidation that are provided in IAS 27 and in

Interpretation 12. The new standard alters the definition of control as a determining factor under which a financial

entity should be consolidated. This standard provides extensive clarifications that dictate the different ways in

which a financial entity (Investor) may control another entity (investment). The revised definition of control

focuses on the need of the right (or capability to direct operations that affect the returns significantly) and the

variable returns (positive, negative or both) in order to presume control. The new standard also provides

clarifications regarding the participating and protective rights as also the relationships between factoring and

factoree. The Group is currently evaluating the impact of the standard on its financial statements.

IFRS 11 ''Joint Arrangements'' (effective for annual periods beginning on or after 1 January 2014).

IFRS 11 provides a more realistic treatment of joint arrangements by focusing on the rights and obligations, instead

of their legal form. The types of joint arrangements are limited to two: either joint operations or joint ventures. The

method of proportional consolidation is no longer acceptable. It is compulsory for the participants in joint ventures

to apply the equity method. The financial entities that participate in joint operations apply the same accounting

treatment as the current participants apply in joint controlled assets or in joint controlled activities. The standard

also provides clarifications in relation to the participants in joint arrangements without the existence of joint control.

The Group is currently evaluating the impact of the standard on its financial statements.

IFRS 12 ''Disclosure of Interests in Other Entities'' (effective for annual periods beginning on or after 1

January 2014).

IFRS 12 addresses the required disclosures of a financial entity, including those of significant judgments and

assumptions, which allow the readers of financial statements to evaluate the nature, the risks and the financial

consequences that relate to the interest of a financial entity to subsidiaries, associates, joint arrangements and non-

consolidated structured entities. A financial entity has the capability to apply some or all of the above disclosures

without being obliged to apply IFRS 12 as a whole, or IFRS 10 or 11 or the amended IAS 27 or 28. The Group is

currently evaluating the impact of the standard on its financial statements.

Transitional Guidance – Amendments to IFRS 10, 11 and 12 (effective for annual periods beginning on or

after 1 January 2014).

The International Accounting Standards Board adopted an amendment to the transition provisions of these

standards. The amendment clarified that the “date of initial application” is the beginning of the annual period in

which first applied IFRS 10. If the conclusion regarding the consolidation or not of the Group at the date of initial

application is different than the one imposed by the provisions of IAS 27 and IFRIC 12, there’s only obligation for

retroactive adjustment of the previous comparative period. The presentation of retrospectively custom information

for prior periods is optional. A similar exception for presenting comparative periods’ restated information is also

provided in the modified transition provisions of IFRS 11 and 12. Moreover, the disclosures relating to non-

consolidated structured entities are not mandatory for any comparative periods prior to the first application of IFRS

12. The Group is considering the implications of the adoption of this amendment on the financial statements.



23

5. IFRS and Interpretations issued but not yet effective (continued)

(i) Standards and Interpretations adopted by the European Union(continued)

Investment Entities Amendments to IFRS 10, 12 and IAS 27 (effective for annual periods beginning on or

after 1 January 2014).

The International Accounting Standards Board adopted the above amendment which establishes the concept of

"Investment Companies" and provides an exemption to the requirement to consolidate companies they control.

Specifically, an investment company will not consolidate its subsidiaries, nor will apply the provisions of IFRS 3

when it obtains control of another entity, but will measure its investment in subsidiaries at fair value through profit

or loss in accordance with IFRS 9. An exception to this rule are the subsidiaries that are not held for the purpose of

profiting from the investment, but to provide services related to the business of investment company. It is clarified,

however, that the parent company, of an investment company which is not itself considered an investment company,

will consolidate all entities it controls, including those controlled by the investment company. The Group is

currently evaluating the impact of the amendments on its financial statements.

IAS 27 (Revised) "Separate Financial Statements" (effective for annual periods beginning on or after 1

January 2014).

This Standard was published at the same with IFRS 10 and in combination, those two standards replace IAS 27

"Consolidated and Separate Financial Statements". The amended IAS 27 addresses the accounting treatment and

disclosures relating to the interest in subsidiaries, joint ventures and associates when a financial entity prepares

separate financial statements. At the same time, the Board transferred to IAS 27 the conditions of IAS 28

“Investments in Associates” and of IAS 31 “Investment in Joint Ventures” which relate to separate financial

statements. The Group is currently evaluating the impact of the standard on its financial statements.

IAS 28 (Revised) 'Investments in Associates and Joint Ventures "(effective for annual periods beginning on

or after 1 January 2014).

The revised IAS 28 "Investments in Associates and Joint Ventures" replaces IAS 28 "Investments in Associates".

The aim of this accounting standard is to define the accounting treatment relating to investments in associates and

to quote the requirements for the application of the equity method according to the accounting of investments in

associates and joint ventures, resulting from the publication of IFRS 11. The Group is currently evaluating the

impact of the standard on its financial statements.

IAS 32 (Amendment) "Offsetting Financial assets and Financial Liabilities" (effective for annual periods

beginning on or after 1 January 2014).

The amendments to IAS 32 clarify the possibility of offsetting financial assets and liabilities, the meaning of “for

the time being there is a legal executable right of offsetting” and that certain gross settlement systems may be

regarded as equal to net settlement. The Group is currently evaluating the impact of the standard on its financial

statements.

IAS 36 (Amendments) 'Recoverable amounts disclosures for Non-Financial Assets' (effective for annual

periods beginning on or after 1 January 2014).

The amendments introduce the disclosure of information in relation to the recoverable amount of the impaired

financial assets, provided that the amount is based on fair value less disposal costs. The Group is currently

evaluating the impact of this standard on its financial statements.

IAS 39 (Amendments) 'Novation of derivatives and continuation of hedge accounting” (effective for annual

periods beginning on or after 1 January 2014).

The amendment allows the continuation of hedge accounting in a situation where a derivative, designated as a

hedging instrument, is renewed so as to be cleared with a new central counterparty, as a result of laws or

regulations, provided certain conditions are met. The Group is currently evaluating the impact of the standard on its




24


(i) Standards and Interpretations adopted by the European Union(continued)

IFRIC 21 "Bank Levies" (effective for annual periods beginning on or after 1 January 2014).

IFRIC 21 provides guidance on when to recognize a liability for a levy imposed by a government, both for levies

accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where

the timing and amount of the levy is certain. The Group is currently evaluating the impact of this interpretation on

its financial statements.

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

IFRS 7 (Amendments) "Financial Instruments: Disclosures” disclosures on transition to IFRS 9 (effective for

annual periods beginning on or after 1 January 2015).

This amendment sets out disclosure requirements for transferred financial assets that are not entirely derecognised

as well as on transferred financial assets which are entirely derecognised but for which the Group has continuing

involvement. It also provides guidance on the application of the required disclosures. The Group is currently


IFRS 9 "Financial Instruments" (the IASB decided temporarily to request the application of this standard

for annual periods beginning on or after 1 January 2018).

On 12 November 2009, the International Accounting Standards Board published the first phase of IFRS 9, which

upon completion will replace IAS 39. The first phase of IFRS 9 requires the classification of financial assets based

how an entity manages these instruments and the contractual cash flow characteristics of the financial assets. The

four categories of financial instruments are abolished and the financial assets are classified under one out of the two

measurement categories: amortized cost and fair value through profit or loss. The Group is currently evaluating the

impact of this standard on its financial statements.

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

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

to use, with some limited changes, certain “regulatory deferral account balances" in accordance with previous

accounting policies both on initial adoption of IFRS and in subsequent financial statements. The Group is currently


IAS 19 (Amendment) "Employee Benefits" (effective for annual periods beginning on or after 1 July 2014).

The amendment clarifies the requirements according to the method used to attribute the benefits of employees or

third parties associated with the service, to the periods of service. Moreover, it allows a practical solution, if the bid

offer does not depended on the number of years of service, may, but does not require the employed benefits to be

recognized as a reduction of cost of service during the period in which the related service is provided. The Group is

currently evaluating the impact of this standard on its financial statements.

Improvements to IFRS 2010 2012 (effective for annual periods beginning on or after 1 July 2014).

In December 2013, the International Accounting Standards Board issued Annual Improvements to IFRS 2010-

2012, a collection of amendments to IFRSs in response to eight issues addressed during the 2010–2012 cycle. These

amendments reflect issues discussed by the IASB during the project which started in 2010, and that were

subsequently included in the Exposure Draft of the proposed amendments to IFRS, Annual Improvements to IFRS

2010- 2012 (published in November 2012). The Group is currently evaluating the impact of improvements in the


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




25


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

IFRS 15, "Revenue from Contracts with Customers" (effective for annual periods beginning on or after

January 1, 2017)

The new standard may have a significant impact on how and when companies should recognize revenue from

contracts with customers. This standard replaces IAS 11 "Construction Contracts", IFRIC 3 "Cliental Loyalty

Programmes”, IFRIC 15” Agreements for real estate," IFRIC 18 "Transfers of Assets from Customers" and SIC 31

“Revenue-Barter transactions involving Advertising Services”. The standard includes a template applicable for

contracts with customers and two approaches to the recognition of revenue: at one point in time or over time.

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

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

The amendments to IAS 38 “Intangible assets” introduce the prerequisite that the use of revenue as a basis for

calculating the amortization for intangible assets is inappropriate. This presumption can be overcome only when

revenue and the consumption of the economic benefits of the intangible asset are highly correlated or when the

intangible asset is presented as a measure of revenue. The amendments to IAS 16 “Property, Plant and Equipment”

state that the use of revenue as a basis for the calculation of depreciation for property, plant and equipment is

inappropriate.

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

periods beginning on or after January 1, 2016)

The amendment clarifies that the accounting treatment applicable to business combinations also applies to the

acquisition of additional interest in a joint venture while the joint venturer retains joint control. The additional shares

acquired should be measured at fair value. The previous interest held by the joint ventures should not be

remeasured.

The Committee does not expect that the implementation of these standards in future periods will have a material

impact in the consolidated financial statements of the Group.

6. Significant accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out

below. These policies have been consistently applied to all years presented in these consolidated financial

statements unless otherwise stated.

The presentation of the comparatives in the consolidated statement of profit and loss and comprehensive income has

changed in order to correspond with the adoption of IAS 1 (Amendment) “Presentation of items Oo Other

Comprehensive Income”.

6.1 Basis of Consolidation

The Company has subsidiary undertakings and as per the International Financial Reporting Standards consolidated

financial statements should be prepared and submitted to the Bank at the Annual General Meeting. The consolidated

financial statements incorporate the financial statements of the Board and entities (including special purpose

entities) controlled by the Board (its subsidiaries). Control is achieved where the Board has the power to govern the

financial and operating policies of an entity so as to obtain benefits from its activities.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated

statement of profit or loss and other comprehensive income from the effective date of acquisition and up to the

effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of

the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit

in balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies

in line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.



26

6. Significant accounting policies (continued)

6.1 Basis of Consolidation (continued)

Minority interest – Financial Institutions

As at the year end, CCB exercised effectively full control of the Cooperative Credit Institutions. The formation of

the 99% percentage occured in 2014 after the publication of the related decree by the Ministry of Finance. As a

result, at the end of the year no minority interest is recognised.

Minority interest – Non-Financial Institutions

During the year end there was a minority interest in some of the companies with trading operations. The information

that exists for the estimation of the relevant amounts is approximate. In addition, the minority interest of these

companies in its total has been assessed as not material in relation to these consolidated financial statements, and

therefore no minority interest in these consolidated financial statements has been recognised.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between

(i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the

previous carrying value of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling

interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative

gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously

recognised in other comprehensive income and accumulated in equity are accounted for as if the Group had directly

disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as

specified by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when

control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial

Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in

an associate or a jointly controlled entity.

6.2 Transactions under common control

A business combination involving entities or businesses under common control is a business combination in which

all of the combining entities or businesses are ultimately controlled by the same party or parties both before and

after the combination, and that control is not transitory

Business combination of companies under common control

Business combination of companies regarding entities which are, in the end, controlled by the same party or parties

before and after the business combination and this control is not transitory, is treated using the uniting of interest

method. The principles of uniting of interests method are:

The Group does not adjust the assets and liabilities at fair value but instead incorporates assets and liabilities at

book values as shown in the books of the acquired company adjusted to achieve alignment with the accounting

policies of the Company.

The merger reserve is created from the difference between the share capital of CCIs and the companies of the

trading sector which are consolidated and for which there was no equivalent investment cost in the books of

CCB and the cost of investment in the share capital of CCB in the books of CCIs.

The consolidated financial statements incorporate the profit or loss of acquired companies which were absorbed,

as if the companies (acquirer and acquiree) were consolidated from the date which common control was first

established. As a result the consolidated financial statements reflect the profit or loss of all the companies

absorbed during the entire period even if the merger was performed during the period. Moreover, the

corresponding amounts of the previous period reflect the consolidated profit or loss of the companies absorbed

even though the transaction occurred in the current period.



27


6.3 Interest income and expense

Interest income and expense are recognized in profit or loss using the effective interest method. The ‘effective

interest rate’ is the rate that exactly discounts the estimated future cash payments and receipts through the expected

life of the financial asset or financial liability to the carrying amount of the financial asset or financial liability. The

effective interest rate is calculated at the initial recognition of the financial instrument and it is not revised at a later

date.

Income from interest of loans granted to customers which correspond to the amount of impairment loss, are deferred

and recognized in profit and loss when received.

6.4 Fee and commission income and expenses

Fee and commission income is recognized on an accrual basis in the period the services occured, whereas fees and

commissions in respect of loans and other advances are recognized in profit or loss using the effective interest rate

method.

6.5 Rental income

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

6.6 Income from investments in securities

Dividend from investments in securities is recognized when the right of the Group to receive payment is established.

Withheld taxes are transferred to profit or loss. Interest income from investments in securities is recognized on an

accrual basis.

Profit or loss from the sale of investments in securities that represents the difference between the net proceeds and

the carrying value of the investments disposed is transferred to profit or loss.

6.7 Interest income

Interest income is recognized on a time proportion basis using the effective interest method.

6.8 Investments in associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an

interest in a joint venture. Significant influence is the power to participate in the financial and operating policy

decisions of the investee but is not control or joint control over those policies.

The results, assets and liabilities of associates are incorporated in these consolidated financial statements using the

equity method unless the investments are classified as available for sale, where they are treated according to IFRS 5

“Non-Current Assets Held For Sale and Discontinued Operations”. According to the equity method, the investment

in an associate is recognized firstly in the consolidated statement of financial position at cost and then adjusted to

recognize the share of the Group in the profit or loss and other comprehensive income of the associate. When the

share of the Group is greater than the losses of an associate (which includes every long term participation which, in

fact, is part of the net investment of the Group in the associate), the Group ceases to recognize its excess share

losses. Additional losses are recognized only in the occasion that the Group has been charged with legal or

constructive commitments or has made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities

and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is

included within the carrying value of the investment. Any excess of the Group's share of the net fair value of the

identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised

immediately in profit or loss.



28


6.8 Investments in associates (continued)

The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with

respect to the Group’s investment in an associate. When necessary, the entire carrying value of the investment

(including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by

comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying value.

Any impairment loss recognised forms part of the carrying value of the investment. Any reversal of that impairment

loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment

subsequently increases.

When a Group entity transacts with its associate, profits and losses resulting from the transactions with the associate

are recognised in the Group' consolidated financial statements only to the extent of interests in the associate that are

not related to the Group.

6.9 Foreign currencies

Foreign currency transactions are translated in the functional currency using the exchange rate ruling at the date of

the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated into Euro at the rate of exchange

ruling at the reporting date. All differences arising on translation are recognized in the profit or loss.

Non-monetary items denominated in foreign currency and measured at historic cost are translated using the

exchange rates ruling as at the dates of the initial transactions.

6.10 Segmental reporting

Operating segments are presented according to the internal reporting provided to the chief operating decision maker.

The chief operating decision maker is the person or group of persons responsible for the allocation of resources to

operating segments and the assessment of their performance. The Bank has identified the Committee as its chief

operating decision-making body.

6.11 Retirement benefit costs

The Group and the employees contribute to the Government Social Insurance Fund based on the salary of the

employees. In addition, the Group follows a Defined Benefit Plan (Provident Fund), the assets of which are kept in a

separate account. The plan is funded by payments made by the employees and the Group. The contributions of the

Group are written off in the period they relate to and are included to the employee costs. The Group does not have

any legal or implied liability to pay extra contributions if the plan does not have sufficient funds to pay all the

employees for benefits relating to their services during the current and previous periods.

6.12 Taxation

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

relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax liabilities and assets for the current and prior periods are measured at the amount expected to be paid to

or recovered from the taxation authorities, using the tax rates and laws that have been enacted, or substantively

enacted, by the reporting date and any adjustment to tax payable or receivable in respect of previous years.

The Group is not subject to income tax on income from transactions with Members.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the

consolidated statement of financial position and the corresponding tax bases. Deferred tax assets are recognised to

the extent that it is probable that future taxable profit will be available against which the temporary differences can

be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent

that it is no longer probable that sufficient taxable profits will be realised.



29


6.12 Taxation (continued)

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the

asset realised taking into account the tax rates that were enacted or substantially enacted by the reporting date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets

against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the

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

6.13 Special Levy

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

the years 2011 and 2012, on credit institutions was imposed at the rate of 0,095% on qualifying deposits held by

each credit institution at 31 December of the year preceding the year of taxation. Amendments which were

approved on 21 December 2012, applying the terms of the Memorandum between the Republic of Cyprus and the

lenders, provide for the extension of the validity of the relevant law, increase of the special levy tax to 0,11% and

the deletion of provision under which the tax paid should not exceed 20% of the total taxable profits of the credit

institution assessed by the Director of Inland Revenue. A subsequent amendment to the Law, published in the

Governmental Gazette on the 29th of April 2013, provided for an increase rate to the special levy of 0,15%. Based

on new Law amendment published in the Governmental Gazette on the 26th of July 2013 the special levy, from the

year 2013 and thereafter, is calculated on a quarterly basis at the rate of 0,0375% on qualifying deposits held by

each credit institution as at 31 December, 31 March, 30 June and 30 September of each year.

On 22 March 2013, the Law on the Establishment and Operation of the Deposit Protection and Resolution of Credit

and Other Institutions Scheme, as well as for relevant matters, was enacted and the Law on the Establishment and

Operation of the Independent Financial Stability Fund of 2011, which was applicable from 1st of January 2013, was

repealed.

Based on the provisions of the new Law, two Funds are operated (The Deposit Protection and Resolution of Credit

and Other Institutions) and their Funds are made up of:

1. The Deposit Protection Fund – transfer of the total of the account, in which the contributions of the credit

institutions were deposited, based on the provisions of article 34 of the Banking Operations Law. Regular or

extraordinary contributions to be imposed by the Management Committee of the Fund, loans, income from

investments, donations and other income.

2. The Resolution of Credit and Other Institutions Fund – transfer of 25/60 of total revenue from the imposition of

special levy, original or extraordinary contributions to be imposed by the Management Committee of the Fund,

amounts derived from possible sanctions imposed on the affected institutions, loans, income from investments,

donations and other income.

6.14 Property, plant and equipment

Land and buildings are carried at fair value, based on valuations by external independent valuers, less subsequent

depreciation for buildings. Revaluations are carried out with sufficient regularity such that the carrying value does

not differ materially from that which would be determined using fair value at the reporting date. All other property,

plant and equipment are stated at historical cost less depreciation.

Increases in the carrying value arising on revaluation of property, plant and equipment are credited to fair value

reserves in equity. Decreases that offset previous increases of the same asset are charged against that reserve; all

other decreases are charged to profit or loss. Each year the difference between depreciation based on the revalued

carrying value of the asset (the depreciation charged to profit or loss) and depreciation based on the asset's original

cost is transferred from fair value reserves to retained earnings.

Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet

determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for

qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Depreciation of

these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.



30


6.14 Property, plant and equipment (continued)

Depreciation is calculated on the straight-line method so as to write off the cost or revalued amount of each asset to

its residual value, over its estimated useful life.

The annual depreciation rates used are as follows:

Buildings 3%-10%

Plant and equipment 10%-20%

No depreciation is calculated on land and on properties under construction.

The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

Where the carrying value of an asset is greater than its estimated recoverable amount, the asset is written down

immediately to its recoverable amount.

Expenditure for repairs and maintenance of property, plant and equipment is charged to profit or loss of the year in

which it is incurred. The cost of major renovations and other subsequent expenditure are included in the carrying

value of the asset when it is probable that future economic benefits in excess of the originally assessed standard of

performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining

useful life of the related asset.

The book value of property, plant and equipment is reviewed for impairment when events or changes in conditions

indicate that the book value may not be recoverable. If there is such an indication and the book value is higher than

the estimated recoverable amount, then the book value of the asset is impaired to the recoverable amount. The

recoverable amount of property, plant and equipment is the higher amount between net selling price and value in

use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are

expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an

item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying

value of the asset and is recognised in profit or loss. When revalued assets are sold, the amounts included in the fair

value reserves are transferred to retained earnings.

6.15 Deferred income

Deferred income represents income receipts which relate to future periods.

6.16 Deferred income from government grants

Government grants on non-current assets acquisitions are recorded as deferred income and recognised as income on

a systematic and rational basis over the useful life of the asset. Grants are recognised when there is reasonable

assurance that the Group will comply with the conditions attached to them and that the grants will be received.

Government grants that relate to expenses are recognised in profit or loss as revenue.

6.17 Investment Properties

Investment properties include investments in land and buildings held for rental and/ or for capital appreciation,

instead of use in the ordinary course of business or for sale. Investment properties are initially recognised at cost

which includes the expenses arising from the transaction and subsequently measured at market value at year end.

Fair value of property is determined annually by independent valuers before deducting any expenses that the Group

will incur during the sale of the assets.



31


6.17 Investment Properties (continued)

Gains or losses arising from revaluation of investment properties that is included in the results of the year,

represents the difference between the market value at the end of the year and the market value at the beginning of

the year or the cost of investment properties purchased during the year.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn

from use and no future economic benefits are expected from the continued use of the asset. Any gain or loss arising

on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying

value of the asset) is included in profit or loss in the period in which the property is derecognised.

6.18 Properties held for sale

Properties held for sale are measured at the lower of cost or net realisable value.

6.19 Computer software

Costs that are directly associated with identifiable and unique computer software products controlled by the Group

and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible

assets. Subsequently computer software is carried at cost less any accumulated amortisation and any accumulated

impairment losses. Expenditure which enhances or extends the performance of computer software programmes

beyond their original specifications is recognised as a capital improvement and added to the original cost of the

computer software. Costs associated with maintenance of computer software programmes are recognised as an

expense when incurred. Computer software costs are amortised using the straight-line method over their useful

lives, not exceeding a period of three years. Amortisation commences when the computer software is available for

use and is included within administrative expenses five years. Amortisation commences when the computer

software is available for use.

The residual value and useful economic life are reviewed and adjusted at every reporting period, if it is considered

necessary.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or

disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the

disposal proceeds and the carrying value of the asset, are recognised in profit or loss when the asset is derecognized.

6.20 Operating Leases

Leases, where substantially all risks and rewards of ownership of an asset are transferred to the lessee, are classified

as finance leases. All other lease agreements are classified as operating leases.

The Group has only entered into operating lease agreements for property either as a lessor or as a lessee.

For operating leases where the Group is the lessor, the leased property is recognised as an asset of the Group and is

depreciated over its useful life. Rental income from operating leases is recognized in the consolidated statement of

profit or loss and other comprehensive income on a straight line basis over the period of the lease.

For operating leases where the Group is the lessee, the leased property is not recognised as an asset of the Group.

Rental expenses made under operating leases are charged to the profit or loss on a straight line basis over the period

of the lease.



32


6.21 Financial Instruments

6.21.1 Recognition

The Group initially recognises loans and other advances to customer, deposits to customers and debt securities

issued on the date on which they are originated. All other financial instruments are recognized on the trade date,

which is the date on which the Group becomes a party to the contractual provisions of the instrument. A financial

asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss,

transaction costs that are directly attributable to its acquisition or issue.

The Group classifies its financial assets as following:

Loans and advances to customers

held to maturity

available for sale

at fair value through profit or loss

The Group classifies its financial liabilities as liabilities at amortized cost.

6.21.2 Derecognition

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset

expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the

risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor

retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

Rights or obligations that were created or retained by the Group during the transfer are recognised as an asset or

liability On derecognition the difference between the carrying amount of the asset and the sum of the consideration

and any gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

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

.

6.21.3 Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position

when, and only when, the Group has a legal right to set off the amounts and it intends either to settle them on a net

basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted under the accounting standards, or for gains

and losses arising from a group of similar transactions.

6.21.4 Measurement at amortised cost

The ‘amortised cost’ of a financial asset or financial liability is the amount at which the financial asset or financial

liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation

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

minus any reduction for impairment.

6.21.5 Fair value measurement

Applies from 1 January 2013 onwards

‘Fair value’ is the price that would be received from the disposal of an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date in the main or, in its absence, the most

advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-

performance risk.



33


6.21 Financial Instruments (continued)

6.21.5 Fair value measurement (continued)

Applies from 1 January 2013 onwards (continued)

When available, the Group measures the fair value of an instrument using the quoted price in an active market for

that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient

frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of

relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique

incorporates all of the factors that market participants would take into account in pricing a transaction.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price –

i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial

recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active

market for an identical asset or liability nor based on a valuation technique that uses only data from observable

markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the

fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss

on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by

observable market data or the transaction is closed out.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and

long positions at a bid price and liabilities and short positions at an ask price.

Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed

by the Group on the basis of net exposure to either market or credit risk are measured on the basis of a price that

would be received to sell a net long position (or paid to transfer a net short position) for a particular risk exposure.

Those portfolio level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk

adjustment of each of the individual instruments in the portfolio.

The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on

which the amount could be required to be paid.

The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period

during which the change has occurred.

Applies prior1 January 2013

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

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

When available, the Group measures the fair value of an instrument using quoted prices in an active market for that

instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual

and regularly occurring market transactions on an arm’s length basis.

If a market for a financial instrument is not active, then the Group determines fair value using a valuation technique.

The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates

specific to the Group, incorporates all factors that market participants would consider in setting a price and is

consistent with accepted economic methodologies for pricing financial instruments.

The best evidence of the fair value of a financial instrument at initial recognition is the transaction price i.e. the fair

value of the consideration given or received. However, in some cases the initial estimate of fair value of a financial

instrument on initial recognition may be different from its transaction price. If this estimated fair value is evidenced

by comparison with other observable current market transactions in the same instrument (without modification or

repackaging) or based on a valuation technique whose variables include only data from observable markets, then the

difference is recognised in profit or loss on initial recognition of the instrument.



34



6.21.5 Fair value measurement (continued)

Applies before 1 January 2013 (continued)

In other cases, the fair value at initial recognition is considered to be the transaction price and the difference is not

recognised in profit or loss immediately but is recognised over the life of the instrument on an appropriate basis or

when the instrument is redeemed, transferred or sold, or the fair value becomes observable.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and

long positions at a bid price and liabilities and short positions at an ask price. Where the Group has positions with

offsetting risks, mid-market prices are used to measure the offsetting risk positions and a bid or ask price adjustment

is applied only to the net open position as appropriate.

The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on

which the amount could be required to be paid.

6.21.6 Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in

an active market and the Group has no intention for trading immediately or in the foreseeable future. Loans and

receivables include advances to customers and banks.

Loans and receivables are recognized initially at fair value plus any attributable transaction costs and are are

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

6.21.7 Receivables from trade operations

Trade receivables are initially measured at fair value and are subsequently measured at amortised cost using the

effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit

or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the

difference between the asset's carrying amount and the present value of estimated future cash flows discounted at

the effective interest rate computed at initial recognition.

6.21.8 Investments

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

assets are classified in the above categories upon initial recognition based on their characteristics and the purpose of

their acquisition.

(i) Held to maturity investments

‘Held to maturity investments’ are non-derivative assets with fixed or determinable payments and fixed maturity

that the Group has the positive intent and ability to hold to maturity, and which are not designated as at fair value

through profit or loss or as available for sale.

After initial recognition held-to-maturity investments are carried at amortised cost using the effective interest

method, less any impairment losses.

A sale or reclassification of a significant amount of held to maturity investments would result in the reclassification

of all held to maturity investments as available for sale, and would prevent the Group from classifying investment

securities as held-to-maturity for the current and the following two financial years.



35



6.21.8 Investments (continued)

(ii) At fair value through profit or loss

Financial assets at fair value through profit or loss are allocated to the following categories:

(a) Assets for commercial use

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

Changes in fair value assets that are designated at assets at fair value through profit or loss fair value are included in

profit or loss.

(iii) Available for sale

Available for sale investments are non-derivative investments that are designated as available for sale or are not

classified in any other category of financial assets. Available for sale investments comprise equity securities and

debt securities.

Investments in unquoted equity securities for which the fair value cannot be reliably measured are classified as

financial assets at cost. The category includes the investments in Cooperative Credit Institutions. The Cooperative

Companies Law does not allow the transfer of shares which are held by a Cooperative Credit Institutions to a third

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

members cannot be completed unless there is an approval of the Committee of the Cooperative Credit Institutions.

In addition, each member-shareholder of a cooperative credit institution holds only one vote irrespective of the

number of shares held.

The remaining available for sale financial assets are measured at their fair value after initial recognition. Gains and

losses arising from changes in the fair value are directly recognized in equity with the exception of impairment

losses. On disposal or impairment of the investments, the cumulative gain or loss which was previously recognized

in equity, is recognized in profit or loss for the period.

6.21.9 Deposits and other customer accounts

After initial recognition they are measured at amortised cost, using the effective interest rate method apart from

some specific deposits associated with derivatives which the Group has decided to classify as assets at fair value

through profit or loss, for which any changes at fair value are recognised in the consolidated statement of profit or

loss and other comprehensive income.

6.21.10 Cash and cash equivalents

Cash and cash equivalents for the purposes of the consolidated statement of cash flows consist of cash, in hand and

at banks and equivalent securities that can be liquidated immediately.



36



6.21.11 Loans payable

Loans are recognized at the initial amount of proceeds received, net of financing costs . Loans are subsequently

stated at amortized cost. Any differences between the proceeds (net of costs) and the repayment value is recognized

in profit or loss over the duration of the loan using the effective interest method.

6.22 Impairment

6.22.1 Financial assets

At each reporting date, the Group assesses whether there is objective evidence that financial assets not carried at fair

value through profit or loss are impaired.

Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial

recognition of the assets and that the loss event has an impact on the future cash flows of the assets that can be

estimated reliably.

Objective evidence that financial assets are impaired may include default or delinquency by the borrower,

restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider, indications

that the borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other

observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in

the group, or economic conditions that correlate with defaults in the group. In addition, for an investment in an

equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

The Group evaluates whether valid evidence of probable impairment exist in its loan portfolio at both on individual

and on collective basis. All individually significant loans are assessed for individual impairment. All individually

significant loans that were individually assessed but found not to be individually impaired are then collectively

assessed for any impairment that has been incurred but not yet recorded. Loans that are not individually significant

are then collectively assessed for any impairment by grouping together loans with similar risk characteristics. The

calculation of the provision for impairment is based on the Group’s assessment in relation to the historical trends of

losses demonstrated by the relevant groups with similar risk characteristics.

Impairment losses on assets measured at amortised cost are calculated as the difference between the carrying

amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate.

If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one

due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be

derecognised. If the cash flows of the renegotiated asset are substantially different, then the contractual rights to

cash flows from the original financial asset are deemed to have expired and the original financial asset is

derecognised and the new financial asset is recognised at fair value.

Impairment losses are recognised in profit or loss and reflected in an allowance account against loans and

receivables or held to maturity investment securities. Interest on the impaired assets continues to be recognised

through the unwinding of the discount. The Group examines whether there are any valid indications for impairment

for investments held to maturity on an individual basis.

If an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, then

the decrease in impairment loss is reversed through profit or loss.

When there is objective evidence that an available for sale investment is impaired, the cumulative loss that had been

recognised in equity is reclassified from equity to profit or loss. The amount of the cumulative loss that is

reclassified from equity to profit or loss is the difference between the acquisition cost (net of any principal

repayment and amortisation) and current fair value, less any impairment loss on that investment previously

recognised in profit or loss.



37


6.22 Impairment (continued)

6.22.1 Financial assets (continued)

If, in a subsequent period, the fair value of an impaired available for sale debt security increases and the increase can

be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the

impairment loss will be reversed, with the amount of the reversal recognised in profit or loss. Any future increase in

fair value is recognized in other comprehensive income. The Group writes off a loan or an investment debt security,

either partially or in full, when it determines that there is no realistic prospect of recovery.

6.22.2 Non financial assets

The carrying amounts evaluated the Group’s non-financial assets (other than investment properties and deferred tax

receivable) are reviewed at each reporting date to determine whether there is any indication of impairment. If any

such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less

costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a

pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the

asset.

An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its estimated

recoverable amount. Impairment losses are recognised in profit or loss.

The loss from impairment of other non financial assets is reversible only to the extent that the carrying value does

not exceed net carrying value that the financial asset would had if the impairment loss was not recognized.

6.23 Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that

can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the

obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects

current market assessments of the time value of money and the risks specific to the liability. When the Group

expects a provision to be repaid, for example under an insurance contract, the repayment is recognized as a separate

asset only when the repaymentt is virtually certain.

6.24 Non-current liabilities

Non-current liabilities represent amounts that are due more than twelve months from the date of the consolidated

statement of financial position.

6.25 Repurchase agreements

Securities sold subject to repurchase agreements (‘repos’) continue to be recognised in the statement of financial

position. The proceeds from the sale of the securities are recognised as ‘Repurchase Agreements’. Securities

purchased, on condition that they will be resold in the future (‘reverse repos’), are not recognised in the statement of

financial position. The amounts paid for purchase thereof are recognised as ‘Reverse Repos Agreements’. The

difference between the sale and repurchase consideration is recognised as interest income or expense over the life of

the repurchase agreement using the effective interest rate method.



38


6.26 Financial guarantee contracts

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the

holder for a loss incurred because a specified debtor failed to make payments when due, in accordance with the

terms of a financial instrument.

Guarantees and documentary credits are the financial guarantees the Group provides to its customers.

Financial guarantees are initially recognised at fair value on the date the guarantee was granted. Because all

guarantees agreed are on normal commercial terms and the value of the premium agreed corresponds to the value of

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

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

initial amount, less cumulative amortisation of fees, which are recognised as income on a straight line basis during

the guarantee period and the net present value of the best estimate of the amount required to settle the probable

obligation as a result of the guarantee.

6.27 Inventories

Inventories are stated at the lower of cost and net realizable value. The cost is determined using the weighted

average method. Net realizable value is the estimated selling price in the ordinary course of business, less the costs

to completion and selling expenses.

6.28 Share capital

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

equity.

6.29 Dividends

Dividends payable are recognized as a liability in the financial statements of the Bank in the year in which they are

approved for payment. In particular, interim dividends are recognised as a liability in the year in which they are

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

the members of the Bank.

6.30 Events after the reporting period

Assets and liabilities are adjusted for events incurred during the period between the reporting period and the date

that the financial statements are approved by the Committee, in cases where these events offer additional

information on the valuation of amounts relative to conditions existing at the reporting date.



39

7. Pro forma consolidated statement of financial position

The Group as part of its recapitalization received on 28 February 2014 a capital injection from the Cyprus

Government amounting to € 1,5 billions in the form of a bond of the European Stability Mechanism, giving in

exchange 99% of the CCB shares.

The following consolidated statement of financial position presents the financial position of the Group as at 31

December 2013 as if the recapitalization of €1,5 billions from the Government took place on 31 December 2013.

The relevant adjustments relate to presenting an increased share capital of € 1,5 billions and the inclusion in the

assets of the Eurobond issued by the European Stability Mechanism in the investments held to maturity.

2013

€'000

ASSETS

Cash 100.837

Deposits with central banks 959.275

Deposits with other banking institutions 64.133

Loans and other advances to customers 10.778.140

Inventories 44.676

Properties held for sale 83.321

Financial assets at fair value through profit or loss 202

Available for sale financial assets 24.825

Investments held to maturity 2.517.476

Investment properties 254.990

Property, plant and equipment 331.864

Intangible assets 1.685

Investments in associates 208

Other assets 46.959

Total assets 15.208.591

Liabilities

Amounts due to other banks 83.600

Deposits and other customer accounts 13.477.149

Repurchase agreements 202.581

Other loans 74.206

Loans for the repayment of refugee deposits 36.534

Deferred income 90

Other liabilities 127.534

Total liabilities 14.001.694

Equity

Share capital 1.600.836

Reserves (393.939)

Total equity 1.206.897

Total equity and liabilities 15.208.591

Taking into consideration the recapitalization amount of €1,5 billions and the revaluation reserves, the equity ratio

amounts to 12.1%.



40

8. Segmental analysis

Banking,

financial and

insurance

services

Trading

activities Total

€'000 €'000 €'000

2013

Net interest income/expense 412.033 (303) 411.730

Fees and commissions income 36.616 94 36.710

Fees and commissions expense (1.899) - (1.899)

Other losses / income (68.009) 20.419 (47.590)

Total net income 378.741 20.210 398.951

Staff costs (109.939) (15.694) (125.633)

Depreciation (10.507) (3.278) (13.785)

Other operating expenses (44.868) (18.985) (63.853)

Total expenses (165.314) (37.957) (203.271)

Operating profit before impairment provisions 213.427 (17.747) 195.680

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

Increase in provisions for impairments of loans and other

advances (1.868.747) (49) (1.868.796)

Other expenses (4.478) - (4.478)

Loss before tax (1.676.698) (17.796) (1.694.494)

2012

Net interest income/expense 338.101 (184) 337.917

Fees and commissions income 38.471 100 38.571

Fees and commissions expense (3.585) - (3.585)

Other losses / income (21.536) 24.995 3.459

Total net income 351.451 24.911 376.362

Staff costs (110.787) (16.623) (127.410)

Depreciation (10.368) (3.907) (14.275)

Other operating expenses (56.061) (14.085) (70.146)

Total expenses (177.216) (34.615) (211.831)

Operating profit before impairment provisions 174.235 (9.704) 164.531

Charge for impairment in value of investments held to maturity (2.000) - (2.000)

Increase in provisions for impairment of loans and other

advances (173.963) - (173.963)

Other expenses (314) - (314)

Loss before tax (2.042) (9.704) (11.746)



41

9. Interest income

2013 2012

€'000 €'000

Loans and other advances to clients 825.716 841.690

Deposits in Central Bank of Cyprus 1.060 1.685

Deposits in other bank institutions 1.886 2.638

Treasury bills 450 2.212

Debt securities 57.800 70.392

886.912 918.617

10. Interest expense

2013 2012

€'000 €'000

Deposits from customers 472.396 575.564

Loans payable 1.042 1.331

Repurchase agreements 1.122 1.542

Bonds 31 1.304

Amounts due to other banks 584 955

Loan Commissioners- Agricultural Development 7 4

475.182 580.700

11. Other net losses

2013 2012

€'000 €'000

Net loss from disposal of property, plant and equipment (77) (128)

Fair value gains on financial assets at fair value through profit or loss 49 32

Credit interest 56 35

Impairment charge on investment properties (2.654) (1.205)

Impairment charge on properties held for sale (17.813) (2.255)

Impairment charge on properties, plant and equipment (7.867) (174)

(28.306) (3.695)

12. Other income

2013 2012

€'000 €'000

Net income on trading in foreign currencies 854 929

Gross profit from trading sector 5.663 6.243

Government grants 40 4.327

Proceeds from trading sector debtors which were written off 46 -

Rents receivable 4.411 4.921

Sundries 2.436 2.441

13.450 18.861



42

13. Staff costs

2013 2012

€'000 €'000

Wages and salaries 97.870 97.624

Social insurance costs and other Government funds 8.365 8.313

Other contributions 3.627 3.414

Social cohesion fund 1.908 1.916

Special contribution 296 291

Provident fund contributions 9.221 10.341

Expenses for early retirement plan 1.420 1.078

Costs for defined retirement benefit plan (Notes 6.11 and 14) 1.289 2.275

123.996 125.252

Other staff costs 1.637 2.158

125.633 127.410

Average number of employees (including Committee Members in their executive

capacity) 2.973 3.086

Reduction of CCS payroll

According to the Restructuring Plan, it was decided to reduce the payroll of the Group by an average of 15%. This

reduction was achieved by scaled reduction of the wages and by decreasing employer contributions to the

Provident Fund by 7%. For the months of November and December 2013 and January and February 2014 no

contribution was made by the employer to the Provident Fund of the CCIs.

Wage reductions were put in force from 1/1/2014 for the CCIs and from 1/2/2014 for the Cooperative Central Bank

(decree of the Ministry of Finance issued on 29 January 2014). From the above reductions, savings of € 18,6 million

(percentage of 16.25%) were achieved. Additionally, an Early Retirement Scheme was offered to employees of the

CCIs and the CCB.

The Group , other than the mandatory contributions to Social Insurance and other government funds , based on

collective agreements the Group contributes to the following that are included in contributions to other funds.

a)Medical scheme:

Medical care is provided to employees through the Pancyprian Cooperative Health Fund, to which the Group

contributes defined contribution of 1.25% on the total emoluments of the year.

b) Life insurance:

Group life insurance is provided to employees through predefined insurance schemes of companies represented by

the Cooperative Central Bank.

c) Voluntary Retirement Plan of CS:

Under the Restructuring Plan, there was the obligation to establish the above plan and it was expected that at least

282 employees would accept the plan, which addressed those employees over the age of 45, with discretion to

accept people under this age if they wished to leave. The Plan came into force on 12/2/14 and expired on 15/4/2014.

A total of 227 people from the Credit sector and 75 from the Trading Sector (302 individuals in total) accepted the

plan.

The total cost of the plan amounted to €21,1 million.

In addition, the Group has defined contribution plans in the CCIs, the employees Provident Funds, which prepare

separate financial statements and provide their members with defined benefits upon retirement or early termination

of service pursuant to their Articles of Association.



43

14. Employee benefits

As at 31 December 2013 some Cooperative Credit Institutions were offering defined benefit pension plans. These

benefits were terminated in early 2014. The cost from operating these plans was incurred by the affected

Cooperative Credit Institutions.

During the year an amount of €1.289 thousand (2012: € 2.275 thousand) was charged in respect of staff benefits.

The amount recognized is analyzed as follows:

2013 2012

€'000 €'000

Costs under defined benefit plans 1.159 1.369

Current service costs 130 138

Compensation due to termination of employment - 768

1.289 2.275

15. Depreciation

2013 2012

€'000 €'000

Property and equipment for own use (Note 28) 12.859 12.811

Intangible assets (Note 29) 926 1.464

13.785 14.275

16. Other operating expenses

2013 2012

€'000 €'000

Taxes and Licenses 1.093 721

Electricity 3.788 4.605

Cleaning and water supply 1.279 1.352

Insurance 2.073 1.769

Repairs and renovations 1.250 2.434

Telephone and postage 2.619 2.752

Stationery and printing 2.916 3.201

Maintenance of equipment 1.748 1.692

Audit fees 900 3.500

Other Directors remuneration 549 237

Other professional fees 2.753 4.423

Special levy on deposits 17.105 11.375

Remuneration of non-executive Committee members 662 696

Transportation costs 1.813 1.822

Advertisements 5.109 10.879

Other expenses 18.196 18.688

63.853 70.146



44

17. Finance costs

2013 2012

€'000 €'000

Net foreign exchange transaction losses 52 29

Interest expense 33 34

Other finance costs 167 121

252 184

18. Tax

18.1 Tax recognised in profit or loss for the year

2013 2012

€'000 €'000

Corporation tax-current year 3.207 6.395

Prior years tax 1.395 1.371

Defense contribution-current year 372 253

Capital gains tax - 10

Deferred tax - credit (Note 42) (1.775) (2.420)

Share of tax of associates (Note 31) 1 2

Charge of the year 3.200 5.611

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

tax rates as follows:

2013 2012

€'000 €'000

Loss before taxation (1.694.494) (11.746)

Tax calculated at the applicable tax rates (211.812) (1.175)

Tax effect of the profit from transactions with members not subject to tax 92.723 5.456

Tax effect of expenses not deductable for tax purposes 72.314 11.617

Tax effect of allowances and income not subject to tax (7.931) (9.891)

Tax effect of losses brought forward 7 5

Tax effect of loss for the year 55.048 643

10% additional charge 7 6

Defense contribution- current year 372 253

Capital gains tax - 10

Deferred tax (1.775) (2.420)

Prior year tax 1.395 1.371

Other taxes 2.852 (264)

Tax charge 3.200 5.611



45

18. Tax (continued)

18.2 Tax recognized in other comprehensive income

2013 2012

€'000 €'000

Revaluation of land and building (Note 42) 356 (79)

356 (79)

The corporation tax rate is 12,5% (2012:10%). The Group is subject to tax on income arising from transactions with

non-members.

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

19. Deposits with central bank

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

for surplus available funds and are presented below:

2013 2012

€'000 €'000

Deposits with Central Bank of Cyprus 959.250 1.167.332

959.250 1.167.332

Accrued interest 25 59

959.275 1.167.391

2013 2012

Repayment analysis: €'000 €'000

Compulsory deposits 149.250 150.332

Within three months (Note 46) 810.025 1.017.059

959.275 1.167.391

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

reported in note 50.1 of the consolidated financial statements.



46

20. Deposits with other banking institutions

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

2013 2012

€'000 €'000

Deposits with cypriot banks 5.486 24.857

Depositswithn banks abroad 56.648 38.690

Other cash equivalents 1.960 37.121

64.094 100.668

Accrued interest 39 301

64.133 100.969

2013 2012


On demand (Note.46) 4.377 1.966

Within three months (Note.46) 54.462 84.494

Betwen three months and one year 5.294 14.509

64.133 100.969

On 31 December 2013 placements with other banks amounting to €18.602 thousand (2012: €18.602 thousand) were

pledged as collateral.

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

reported in note 50.1 of the consolidated financial statements.

21. Loans and other advances to customers

2013 2012

€'000 €'000

Loans 13.251.846 13.806.032

Loans to companies under liquidation 49.966 50.369

Loans for the repayment of refugee deposits 36.758 36.758

Long term advances for agricultural development 21.161 21.172

13.359.731 13.914.331

Accrued interest 4.024 6.100

13.363.755 13.920.431

Provision for impairment (2.585.615) (674.017)

10.778.140 13.246.414

2013 2012

€'000 €'000

Analysis by category:

Current accounts 1.185.521 1.322.431

Loans 12.040.744 12.455.034

Other debtors 25.581 28.567

13.251.846 13.806.032



47

21. Loans and other advances to customers (continued)

Provision for impairment

Total provision

Individual

provision Total

€'000 €'000 €'000

Balance -1 January 2012 1.044 415.955 416.999

From mergers - 53.077 53.077

Suspension of interest for the year - 37.450 37.450

Provision for the year (86) 203.139 203.053

Decrease in provisions of prior years - (29.090) (29.090)

Write offs - (7.472) (7.472)

At 1 January 2013 958 673.059 674.017

Suspension of interest for the year - 47.682 47.682

Provision for the year 1.760.429 108.367 1.868.796

Decrease provisions of prior years - - -

Write offs - (4.880) (4.880)

At 31 December 2013 1.761.387 824.228 2.585.615

The impairment provision of loans to companies under liquidation as calculated by the CCB amounts to €48.802

thousand (2012: € 49.202 thousand).

2013 2012


On demand 2.069.211 2.032.599

Within three months 176.860 195.220

Between three months and one year 617.876 701.808

Between one to five years 2.947.949 3.342.428

Over five years 7.551.859 7.648.376

Provisions for impairment (2.585.615) (674.017)

10.778.140 13.246.414

The non performing loans as at 31 December 2013 were €6.135.795 thousands (2012: €2.268.124 thousands)

representing 46,00% of the portfolio of loans and other advances to customers (2012: 17,00%). The comparative

figures of 2012 were estimated based on the previous directive.

The analysis of non-performing loans is disclosed in note 52, and is presented in accordance with the definition of

the new directive.

According to the new Directive, customer loans and other advances are considered non-performing when they

present past due balances or are in excess for a period of more than ninety days, they have been restructured and at

the time of restructuring were classified as non-performing or presented arrears for a period of more than 60 days

(with the exception of loans and other advances which on 15th March 2013 were performing, were restructured

between 18th March 2013 and 30th

September 2013 and the restructuring did not provide for a lump sum payment of

20% or higher of the loan or for a grace period over 12 months for interest and over 24 months for capital), they

have been restructured twice or more times in an 18 month period (with the exception of loans and other advances

fully secured with cash).

Until the 30th June 2013, under the Directive of the Central Bank of Cyprus which applied to that date, customer

loans and other advances which were not fully covered with tangible securities and presented past due balances of

more than three months were classified as non-performing.

The exposure of the Group to credit risk and impairment losses in relation to loans and other advances to customers

is reported in note 50.1 of the consolidated financial statements.



48

21. Loans and other advances to customers (continued)

Advances with terms that were renegotiated and forbearance policy

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

2013 2012

€'000 €'000

Commercial sector 43.168 22.290

Construction and Real Estate entities 97.968 33.973

Manufacturing entities 23.730 9.012

Tourism entities 13.799 6.085

Other entities 56.290 23.889

Private sector 1.314.196 484.201

Total 1.549.151 579.450

2013 2012

Analysis by geographical segment: €'000 €'000

Cyprus 10.778.140 13.246.414

10.778.140 13.246.414

22. Inventories

2013 2012

€'000 €'000

Raw materials 2.401 2.192

Finished goods 7.091 7.341

Properties for development 24.360 27.146

Merchandise for resale 10.246 11.342

Currencies 6 258

Carobs 333 507

Spare parts 80 125

Tools - Packaging materials 159 167

44.676 49.078

23. Properties held for sale

2013 2012

€'000 €'000

On 1 January 59.253 52.702

Additions 17.784 6.990

Disposals (215) (496)

Transfer to investment properties 24.312 2.312

Impairment charge (17.813) (2.255)

At 31 December 83.321 59.253



49

23. Properties held-for-sale (continued)

Analysis of property held-for-sale 2013 2012

€'000 €'000

Land for sale 13.596 1.810

Buildings for sale 14.914 7.965

Properties acquired against debts 54.811 49.478

83.321 59.253

24. Financial assets at fair value through profit or loss

2013 2012

€'000 €'000

On 1 January 148 96

Additions 5 20

Change in fair value 49 32

At 31 December 202 148

Financial assets at fair value through profit or loss are traded securities valued at market value at closing prices on

31 December as per the official Stock Exchange bid prices. Financial assets classified at fair value through profit or

loss are expected to be realised within twelve months of the reporting date.

In the cash flow statement, financial assets at fair value through profit or loss are presented within cash flows from

operating activities as part of changes in working capital. In the consolidated statement of profit or loss and other

comprehensive income, changes in fair values of financial assets at fair value through profit or loss are recorded in

operating income.

25. Available for sale financial assets

2013 2012

€'000 €'000

On 1 January 13.034 3.008


Impairment charge (4.234) (149)

Revaluation transferred to equity 3.360 2.271

At 31 December 24.825 13.034

Available for sale financial assets, comprise principally equity securities, are revalued annually at fair value at

closing prices on 31 December. For investments traded in active markets, fair value is determined as per the Stock

Exchange bid prices. For other investments, fair value is estimated as per the current market value of similar

instruments or as per the discounted cash flows of the underlying assets. Equity investments for which fair values

cannot be measured reliably are recognised at cost less impairment.

The following are included in profit or loss with respect to available for sale financial assets:

2013 2012

€'000 €'000

Impairment charge – available for sale financial assets (4.234) (149)

Net (loss) from available for sale financial assets (4.234) (149)



50

26. Investments held to maturity

2013 2012

€'000 €'000

Government debt securities 982.001 1.499.135

Debt securities of Cypriot banks 888 17.974

Debt securities of foreign banks 10.865 180.455

993.754 1.697.564

Accrued Interest 23.722 36.233

1.017.476 1.733.797

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

2013 2012

€'000 €'000

On 1 January 1.733.797 2.148.507

Disposals (699.421) (412.710)

Impairment charge (16.900) (2.000)

At 31 December 1.017.476 1.733.797

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

Agencies as Caa3/B/B. On 28 June 2013 the Cooperative Central Bank accepted the transfer of a bond with nominal

value of €667.000 thousand with a corresponding new bond, with annual interest rate of 4,50% and a maturity date

of 1st July 2019. From this transfer the Bank recognized impairment losses of €16.900 thousand. During 2012, the

results of the Group were charged with an impairment amounting to €2.000 thousand on the bonds of Cyprus

Popular Bank Public Co Ltd which are owned by the Bank. This impairment represents the 100% value of the above

bonds.

Purchase and sales of held to maturity investments are recognised on the transaction date, which is the date that the

Group commits to purchase or sell the asset. The cost of purchase includes transactions costs. The investments are

subsequently presented at amortised cost using the effective yield method.

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

2013 2012

€'000 €'000

Impairment charge on held to maturity investments (16.900) (2.000)



51

27. Investment Properties

2013 2012

€'000 €'000

On 1 January 296.068 304.326


Disposals (556) -

Transfer to properties available for sale (24.312) (2.312)

Transfer from property, plant and equipment 11.874 2.816

Fair value loss (32.734) (11.707)

At 31 December 254.990 296.068

The investment properties are revalued annually on 31 December at fair value, which is the open market value as

estimated by an independent professional qualified surveyor.

28. Property, Plant and Equipment

2013 Land and

Buildings

Property

Under

Construction

Machinery

and

Equipment

Total

€'000 €'000 €'000 €'000

Cost or valuation

At 1 January 320.372 16.366 123.570 460.308

Additions 7.254 10.194 13.029 30.477

Disposals - - (13.499) (13.499)

Adjustments for revaluation (28.319) - - (28.319)

Reclassification from/to properties under

construction 3.264 (3.837) 573 -

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

Balance at 31 December 2013 289.860 22.711 123.673 436.244

Depreciation

At 1 January 5.391 - 96.322 101.713

Charge for the year 5.444 - 7.415 12.859

On disposals - - (11.133) (11.133)

Adjustment for revaluation (6.077) - - (6.077)

Impairment charge - - 7.867 7.867

Transfers to investment property (849) - - (849)

Balance at 31 December 2013 3.909 - 100.471 104.380

Net book value at 31 December 2013 285.951 22.711 23.202 331.864



28. Property, Plant and Equipment (continued)

52

2012 Land and

Buildings

Property

Under

Construction

Machinery

and

Equipment

Total

€'000 €'000 €'000 €'000

Cost or valuation

Balance - 1 January 316.137 11.745 119.146 447.028

Additions 15.477 7.041 7.029 29.547

Disposals - (127) (2.667) (2.794)


Reclassification from/to properties under

construction 2.231 (2.293) 62 -

Transfers to investment properties (2.939) - - (2.939)

At 31 December 320.372 16.366 123.570 460.308

Depreciation

Balance - 1 January 2.843 - 90.424 93.267

Charge for the year 4.449 - 8.362 12.811

On disposals - - (2.638) (2.638)


Impairment charge - - 174 174

Transfers to investment properties (123) - - (123)

At 31 December 5.391 - 96.322 101.713

Net book value at 31 December 2012 314.981 16.366 27.248 358.595

The Group’s land and buildings were revalued in 2013 based on valuations from independent surveyors on the basis

of open market value. The revaluation surplus net of corresponding deferred tax was charged to the fair value

reserve in equity.

In the consolidated cash flow statement the proceeds from the sale of Property, Plant and Equipment comprise of:

2013 2012

€'000 €'000

Net book value 2.366 156

Loss from the disposal of property, plant and equipment (77) (128)

Receipts from disposal of property, plant and equipment 2.289 28



53

29. Intangible Assets

Rights for

use

Computer

Software Total

€'000 €'000 €'000

Cost

Balance - 1 January 2012 23 18.963 18.986

Additions - 1.073 1.073

At 1 January 2013 23 20.036 20.059

Additions - 268 268

At 31 December 2013 23 20.304 20.327

Amortisation

Balance - 1 January 2012 7 16.245 16.252

Charge for the year 5 1.459 1.464

At 1 January 2013 12 17.704 17.716

Charge for the year 4 922 926

At 31 December 2013 16 18.626 18.642

Net book value at 31 December 2013 7 1.678 1.685

Net book value at 31 December 2012 11 2.332 2.343



54

30. Investments in associates

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

are presented below:

Name Country of

incorporation

Main Activities

Cooperative Credit Institution Troodos Ltd Cyprus Financial

Cooperative Savings Bank Pafos Ltd Cyprus Financial

Cooperative Savings Bank Limassol Ltd Cyprus Financial

Cooperative Credit Institution Strovolos Ltd Cyprus Financial

Cooperative Savings Bank Ammochostos – Larnaka Ltd Cyprus Financial

Cooperative Savings Bank Nicosia Ltd Cyprus Financial

Cooperative Savings Bank of Employees of Telecommunications, Energy

and Banks Ltd

Cyprus Financial

Cooperative Credit Institution Ledras Ltd Cyprus Financial

Cooperative Credit Institution Solidarity Ltd Cyprus Financial

Cooperative Credit Institution Lakatamia – Deftera Ltd Cyprus Financial

Cooperative Credit Institution Makrasykas – Larnakas – Eparxias

Ammochostou Ltd

Cyprus Financial

Cooperative Savings Bank Teachers of Cyprus Ltd Cyprus Financial

Cooperative Savings Police and Military officers Ltd Cyprus Financial

Cooperative Credit Institution Kokkinoxorion Ltd Cyprus Financial

Regional Cooperative Credit Institution Limassol Ltd Cyprus Financial

Regional Cooperative Credit Institution Nicosia Ltd Cyprus Financial

Cooperative Credit Institution Tamasou – Orinis and Pitsilias Ltd Cyprus Financial

Cooperative Building & Savings Bank of public officers of Cyprus Ltd Cyprus Financial

Pancyprian Cooperative Confederation Ltd Cyprus Commercial

SEM Ltd Cyprus Commercial

New SEBEGEP Ltd Cyprus Commercial

SOPAZ Ltd Cyprus Commercial

PEAL Troodos Ltd Cyprus Commercial

Newfields Ltd Cyprus Commercial

Comarine Ltd Cyprus Commercial

Cooperative Federation of Carob Supply of Limassol Ltd Cyprus Commercial

Cooperative Federation of Carob Supply of Larnaka Ltd Cyprus Commercial

Cooperative Federation of Carob Supply of Pafos Ltd Cyprus Commercial

Cooperative Federation of Carob Supply Ltd Cyprus Commercial

SYNERGKAZ Ltd Cyprus Commercial

The CCB at the end of the year was exercising substantially full control over the Cooperative Credit Institutions.

The 99% percentage resulted in 2014 after the issue of the relevant decree from the Ministry of Finance.

31. Investments in associates

2013 2012

€'000 €'000

On 1 January 213 -

Additions - 196

Write offs (12) -

Share of results of associates before tax 8 19

Share of tax of associates (1) (2)

At 31 December 208 213


For the year ended 31 December 2013 31. Investments in associates (continued)

55

Details of investments are as follows:

Name

Country of

incorporation

Main activities Participation

%

P&S Lpg Gas Limited Cyprus Trading gas 50

Holco Holdings Limited Malta Shipping 20

32. Other assets

2013 2012

€'000 €'000

Accrued revenues 3.005 1.657

Debtors of trading sector 10.755 18.485

Receivables for cash deficit 2.221 2.268

Receivables for inventory deficit 138 13

Prepayments 3.242 4.222

Rent debtors 1.774 1.582

Insurance claims 100 127

Refundable taxes (Note 41) 8.588 3.217

Deferred tax (Note 42) 580 763

Other receivables 16.556 17.416

46.959 49.750

The exposure of the Group to credit risk and impairment losses in relation to other assets is reported in note 50.1 of

the consolidated financial statements.

33. Amounts due to other banking institutions

2013 2012

€'000 €'000

Cheques under collection 5.740 7.598

Deposits from banks 23.779 19.406

Loans from banks 54.081 54.000

83.600 81.004



56

34. Deposits and other customer accounts

2013 2012

€'000 €'000

Current 925.839 839.620

Savings 1.677.169 1.542.639

Notice 1.146.161 1.433.305

Fixed 9.126.936 10.673.147

Student 50.996 53.507

Permanent 417.936 488.477

13.345.037 15.030.695

Accrued interest 132.112 169.696

13.477.149 15.200.391

2013 2012


On demand 2.719.776 2.681.603

Within three months 6.582.221 7.513.849

Between three months and one year 3.133.199 3.996.479

Between one and five years 23.639 63.155

Over five years 1.018.314 945.305

13.477.149 15.200.391

35. Repurchase agreements

2013 2012

€'000 €'000


On 31 December 2013 the Bank has pledged in favour of the Central Bank of Cyprus deposits with the Central Bank

of Cyprus amounting to €0 (2012: €197.000 thousands) and bonds with book value of €744.807 thousands (2012:

€5.031 thousands)

36. Other loans

2013 2012

€'000 €'000

Loans for reactivation of refugees 17.682 17.682

Other loans 4.318 4.387

Other loans payable 52.206 52.206

74.206 74.275

Loans to the Group for the reactivation of refugees as well as the Groups’s loans to refugees were granted during

the period 1974-1984, from 1 January 2001 no interest is charged on these advances and they are repaid at the same

time period and amount as they are received from the debtors.



57

37. Loan for the repayment of refugee deposits

2013 2012

€'000 €'000

The Republic of Cyprus 36.534 36.534

The loan towards the Group for the repayment of refugees’ deposits, and loans granted by the Group to the refugees

people, that are mentioned in note 21, are interest free and frozen.

38. Loan Capital

Tier 2 capital (non reversible bonds)

2013 2012

€'000 €'000

On 1 January 20.110 20.110

Repayments (2.481) (1.304)

Conversion to fixed deposits (17.660) -

(31) 18.806

Accrued interest 31 1.304

At 31 December - 20.110

(a) On 31 December 2010, the Cooperative Credit Institution of Strovolos, member of the Cooperative Sector

proceeded with the issue of non reversible bonds (straight bonds) amounting to €10.000.000. These bonds have a

maturity date on 31 December 2015 and are part of the Tier 2 capital of the Company for purposes of calculating the

capital base.

(b) On 31 October 2011, the Cooperative Credit Institution Strovolos proceeded with a second issue of non

reversible bonds amounting to € 10.000.000. These bonds, which offer 6,5% interest rate payable every 6 months,

have a maturity date on 31 October 2021, with the option of redemption from 31 of October 2016 and are part of the

Tier 2 capital of the Company for calculation purposes of the capital base.

The above bonds are direct, non guaranteed, subordinated securities of the Cooperative Credit Institution of

Strovolos and are classified at equal priority as to the claims of other security holders, which are of minor priority in

relation to the claims of depositors and other creditors of Cooperative Credit Company Strovolos. The bonds are not

listed on a Stock Exchange and no actions will take place in order to list them. Their issuance was addressed to a

limited group of individuals who were likely to be interested in contributing at least €100.000 each (minimum

issuance amount).

The bonds have a fixed interest rate of 7,0% on their nominal value for the period from their issuance date up to 31

December 2015 (first five year) and fixed interest rate of 8,0% on their nominal value for the period of 1 January

2016 to 31 December 2020. With the exception of the first period which begins on the date of the submission of the

application and the payment of the consideration and ending on 30 June 2011, every subsequent interest period will

be 6 months and the interest will be paid in cash at the end of the period ending on 30 June and 31 December.

After the decision of the General Meeting of the members of Cooperative Credit Institution of Strovolos on

19/12/2012, for the conversion of the liability of the members from unlimited to limited, effective from 1 February

2013 and according to the Cooperative Company Law, Cooperative Credit Instituion Strovolos proceeded to revoke

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

6,5% or liquidate it. As per the above, on January 2013, bonds with a value of €17.550.000 have been converted into

fixed deposits, while the remaining amount of €2.450.000 has been repaid by the Cooperative Credit Institution of

Strovolos to their owners.



58

39. Deferred Income

2013 2012

€'000 €'000

Customer prepayments 14 10

Government Grants 55 88

Other 21 -

90 98

40. Other liabilities

2013 2012

€'000 €'000

Creditors of the trading sector 3.958 6.579

Customer prepayments 566 680

Social insurance and other taxes 1.859 1.238

Value Added Tax 1.678 1.094

Special contribution for defence - withheld 20.513 15.774

Amounts due from customers 2.450 2.716

Provision for charity purposes 505 2.263

Deferred income from government grants - 107

Provisions for other liabilities (Note 43) 2.554 6.415

Deferred tax liabilities (Note 42) 49.520 50.756

Other liabilities 43.931 44.015

127.534 131.637

Provision for charity purposes

According to article 41 paragraph 2 “Profit distribution” of the Cooperative Companies Law no. 22 of 1985, as

subsequently amended, every registered company, with limited or unlimited liability, may, after decision of the

general meeting of the members, contribute to charity or public purposes, an amount not exceeding the 7,5% of its

net profits. The movement on the provision account is as follows:

2013 2012

€'000 €'000

On 1 January 2.263 1.517

Provision for the year (1.758) 746

At 31 December 505 2.263

41. Refundable taxes

2013 2012

€'000 €'000

Corporation tax (8.608) (3.308)

Special contribution for defence 13 6

Special tax of credit institution 7 85

(8.588) (3.217)



59

42. Deferred tax

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

rates (Note 18).

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

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

enacted until the reporting date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets

against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the

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

The movement of the deferred tax account is as follows:

Deferred tax liabilities

Accelerated tax

depreciation

Revaluation of

land and

buildings

Profit on fair

values of

investment

properties

Temporary

tax

differences Total

€'000 €'000 €'000 €'000 €'000

Balance – 1 January 2012 5.818 18.121 25.826 3.029 52.794

Debit / (Credit) to:

Statement of profit or loss and

other comprehensive income

(Note 18.1) (208) (4) (1.702) (45) (1.959)

Fair Value Reserve (Note 18.2) - (79) - - (79)

At 1 January 2013 5.610 18.038 24.124 2.984 50.756


Statement of profit or loss and

other comprehensive income

(Note 18.1) 268 (16) (1.844) - (1.592)

Fair Value Reserve (Note 18.2) - 356 - - 356

At 31 December 2013 5.878 18.378 22.280 2.984 49.520



60

42. Deferred tax (continued)

Deferred tax assets

Tax Losses

Temporary

tax

differences Total

€'000 €'000 €'000

Balance – 1 January 2012 989 235 1.224


Statement of profit or loss and other comprehensive income

(Note 18.1) (479) 18 (461)

At 1 January 2013 510 253 763


Statement of profit or loss and other comprehensive income

(Note 18.1) (228) 45 (183)

At 31 December 2013 282 298 580

43. Provisions for other liabilities

Provisions for

retirement

plans Guarantees Total

€'000 €'000 €'000

Balance - 1 January 2012 22.374 816 23.190

Debit / (Credit) to results - (292) (292)

Amount utilized during the year (16.483) - (16.483)

At 1 January 2013 5.891 524 6.415

Charged / (Credited) to income statement (4.077) 216 (3.861)

At 31 December 2013 1.814 740 2.554

44. Share Capital

2013 2013 2012 2012

Number of

shares €'000

Number of

shares €'000

Authorized

234.192.038 shares at €8,54 each 234.192.038 2.000.000 20.000.000 170.800

Issued and fully paid

On 1 January 11.807.464 100.836 11.458.448 97.855

Issue of shares - - 349.016 2.981

At 31 December 11.807.464 100.836 11.807.464 100.836



61

44. Share Capital (continued)

On 1st July 2013 there was an Extraordinary General Meeting during which it was decided to increase the authorized

capital of the Bank at two billions euro (€2.000.000.000), comprising of two hundred and thirty four millions one

hundred ninety two thousands thirty eight (234.192.038) shares with nominal value of eight euro and fifty four cents

(€8,54) each.

The total issued and fully paid share capital on 31 December 2013 was 11.807.464 shares with nominal value of

€8,54 each (2012: 11.807.464 shares).

According to the Internal Regulations of the Bank, its members may be only Cooperative Institutions, their liability

is only up to the total amount of the nominal value of the shares hold.

On 29 January 2014, a decree of the Minister of Finance was published in the Government Gazette according to

which after the recapitalization of the Cooperative Sector the participation percentage and voting rights of the

Republic of Cyprus in the ownership structure of CCB is ninety nine percent (99%) and of the existing shareholders

of CCB is one percent (1%). For this purpose, the cooperative holding company of CCB is established according to

the article 12E of the Cooperative Companies Law, where the existing shareholders of CCB are transferred with a

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

In addition, regardless of the provisions of the article 31A of the Cooperative Companies Law and in accordance

with the provisions of paragraph (4) of article 14 of the Law, as the above term is interpreted in the decree and in

accordance with the provisions of paragraph 14 of the decree, the nominal value of CCB’s shares amounts to one

euro and twenty eight cents (€ 1,28) per share.

The participation percentage of CCB in the ownership structure of each cooperative credit institution is 99%

regardless of the participation percentage of the Republic of Cyprus in the ownersip structure of CCB and remains

fixed, during the entire period that the Republic of Cyprus participates in the ownership structure of CCB. The

remaining 1% of the participation in the ownership structure and in the voting rights of each Cooperative Credit

Institution will belong to the existing shareholders. For this purpose, a cooperative holdings company is established

in each Cooperative Credit Institution, according to the article 12E of the Cooperative Companies Law, where all

existing shareholders of Cooperative Credit Institution are transferred, with participation to its capital, equivalent to

the participation each shareholder had in the share capital of the Cooperative Credit Institution.



62

45. Reserves

The movement in reserves is disclosed in the consolidated statement of changes in equity.

The profit for distribution relates to the net profit for the year which is distributed according to article 41 of the

Cooperative Companies Law no. 22 of 1985, as subsequently amended.

The Statutory reserve required by law is created as per the article 41(1) of the Cooperative Companies Law no. 22

of 1985, as subsequently amended. This reserve is not available for distribution.

The fair value reserve for land and buildings arises from the revaluation of land and buildings. When revalued land

or buildings are disposed, the portion of the revaluation reserve that relates to that asset is transferred directly to

profit for distribution.

The fair value reserve for available for sale financial assets represents accumulated gains and losses arising on the

revaluation of available for sale financial assets that have been recognized in other comprehensive income, net of

amounts reclassified to profit or loss, if those assets were disposed of or impaired.

The Merger reserve is substantially created from the merger of the CCIs and the companies of the trading sector

that are under the common control, of CCB. The share capital amounts of the CCIs and the trading companies are

transferred to it along with any capital transactions within the Group.

Companies which do not distribute 70% of their profits after tax, as defined by the Special Contribution for the

Defence of the Republic Law, during the two years after the end of the year of assessment to which the profits refer,

will be deemed to have distributed this amount as dividend. Special contribution for defence at 20% for the tax

years 2012 and 2013 and 17% for 2014 and thereafter will be payable on such deemed dividend to the extent that

the owners (individuals and companies) at the end of the period of two years from the end of the year of assessment

to which the profits refer are Cyprus tax residents. The amount of this deemed dividend distribution is reduced by

any actual dividend paid out of the profits of the relevant year at any time. This special contribution for defence is

paid by the company for the account of the owners.

46. Cash and cash equivalents

For the purpose of the consolidated cash flow statement, the cash and cash equivalents include:

2013 2012

€'000 €'000

Cash 100.837 92.537

Deposits with central banks (Note 19) 810.025 1.017.059

Deposits with other banking institutions (Note 20) 58.839 86.460

969.701 1.196.056



63

47. Contingent liabilities and commitments

In order to address the needs of its customers, the Bank conducts business involving documentary credits and

guarantees. These facilities are not recognized in the consolidated statement of financial position and their nominal

amounts as at 31 December are shown below:

47.1. Contingent liabilities and commitments

2013 2012

€'000 €'000

Contingent liabilities

Guarantees 96.410 114.615

Commitments

Undrawn or partly utilized limits advances and loans 573.986 684.678

Documentary credits 1.868 2.570

575.854 687.248

672.264 801.863

The maturity of the contingent liabilities and commitments of the Group are as follows:

2013 2012

€'000 €'000

Within one year 207.377 252.065

Between one and five years 233.768 258.032

Over five years 231.119 291.766

672.264 801.863

Guarantees are irrevocable commitment by the Group to pay a specific amount to a third party in the event of a

customer’s default on his contractual obligations.

Undrawn or partly utilized advances and loans are commitments to provide credit facilities to customers. The credit

facilities are provided for a fixed period of time, are evaluated at regular intervals and can be cancelled by the Group

at any time.

Documentary credits are commitments by the Group to make payments to third parties provided that the terms of the

documentary credit are satisfied, which include the presentation of the bill of lading and other documents.

The Group did not recognize any liability deriving from the above guarantees and documentary credits since it is

estimated that no liability for payment will arise.

47.2. Contingent tax liabilities

Income tax returns which are submitted to tax authorities, are subject to review by the tax authorities. During future

review of the income tax returns, of the current and previous years, of the Group and its subsidiaries by the tax

authorities, there is a possibility that additional tax will be imposed in the year they are examined. The Committee

is not able to assess the amount of these contingent tax liabilities.



47. Contingent liabilities and commitments (continued)

64

47.3. Commitments for capital expenditure

Capital expenditure contracted for at the reporting date but not yet incurred is as follows:

2013 2012

€'000 €'000

Property, plant and equipment 3.013 8.407

Investment properties 15 646

3.028 9.053

The Group provides fund management services that result in the holding or placing of assets on behalf of its

customers. The Group is not liable to its customers for any default by third parties. The assets under management

are not recognized as assets in the consolidated statement of financial position of the Group unless they are placed

with the Group. On the reporting date the total assets under management amounted to €0 million (2011: €10

million).

48. Related parties transactions

Related parties include spouses, minor children and companies in which the members of the Committee/key

management personnel hold, directly or indirectly, at least 20% of the voting rights in general meeting or they are

directors or in any way control these companies.

All transactions with members of the Committee, key management personnel, including their related parties are

made on normal business terms. In addition, a number of advances to key management personnel are provided on

the same terms as to the rest of the personnel of the Bank.

The following transactions were carried out with related parties:

48.1 Committee Members’ remuneration

The remuneration of Committee Members and other key management personnel was as follows:

2013 2012

€'000 €'000

Fees of Non-Executive Members of the Committee 143 108

Remuneration of Executive Members of the Committee 344 408

Remuneration of key management personnel 259 263

Employer contributions 130 137

876 916

The remuneration of non-executive members of the Committee, includes fees which are paid to members in order to

cover expenses for the performance of their duties.

The key management personnel comprises of members of management who are also executive members of the

Committee.



65

48. Related parties transactions (continued)

48.2 Loans and other advances

2013 2012 2013 2012

Number €'000 €'000

Members of the Committee, key management personnel and

related parties:

Less than 1% of the net assets of the Group per member of the

Committee 7 12 893 21.298

Total 7 12 893 21.298

48.3 Deposits

2013 2012

€'000 €'000

Members of the Committee and key management personnel 1.248 2.980

Total 1.248 2.980

48.4 Contingent liabilities and commitments involving related parties

In addition, on 31 December 2013, there were contingent liabilities and commitments relating to guarantees and

lines of credit not used, as follows:

2013 2012

€'000 €'000

Members of the Committee, key management personnel and related parties 102 442

Total 102 442

49. Financial instruments by category

The accounting policies for financial instruments have been applied to the line items below:

31 December 2013

Loans and

receivables

At fair value

through profit

or loss

Available for

sale financial

assets

Held to

maturity

investments

Total

€'000 €'000 €'000 €'000 €'000

Assets as per consolidated

statement of financial position:

Cash and deposits at Central Bank

of Cyprus 1.060.112 - - - 1.060.112

Deposits with other banking

institutions 64.133 - - - 64.133

Financial assets at fair value through

profit or loss - 202 - - 202

Loans and other advances to

customers 10.778.140 - - - 10.778.140

Available for sale financial assets - - 24.825 - 24.825

Held to maturity investments - - - 1.017.476 1.017.476

Other assets 34.549 - - - 34.549

Total 11.936.934 202 24.825 1.017.476 12.979.437



66

49. Financial instruments by category (continued)

Loans and other

financial

liabilities Total

€'000 €'000

Liabilities as per consolidated statement of financial position:

Liabilities to other entities 83.600 83.600

Deposits and other customer accounts 13.477.149 13.477.149


Credit facilities 36.534 36.534


Total 13.725.453 13.725.453

31 December 2012

Loans and

receivables

Fair value

through profit

or loss

Available for

sale financial

assets

Held to

maturity

investments

Total

€'000 €'000 €'000 €'000 €'000

Assets as per consolidated

statement of financial position:

Cash and deposits at Central Bank

of Cyprus 1.259.928 - - - 1.259.928


institutions 100.969 - - - 100.969

Financial assets at fair value

through profit or loss - 148 - - 148


customers 13.246.414 - - - 13.246.414

Available for sale financial assets - - 13.034 - 13.034

Held to maturity investments - - - 1.733.797 1.733.797

Other assets 41.548 - - - 41.548

Total 14.648.859 148 13.034 1.733.797 16.395.838

Loans and other

financial

liabilities Total

€'000 €'000

Liabilities as per consolidated statement of financial position:

Liabilities to other entities 81.004 81.004

Deposits and other customer accounts 15.200.391 15.200.391

Loan capital 20.110 20.110




Credit facilities 36.534 36.534

Total 15.676.547 15.676.547



67

50. Financial Risk Management

Financial risk factors

The most significant risks to which the Group is exposed to are credit risk, market risk, currency risk, interest rate

risk and liquidity risk. The Group has in place a risk management framework which gives emphasis on reliable

measurement of financial risks. These risks are monitored and managed as follows:

50.1 Credit risk

Credit risk arises from the customers’ inability to repay their loans and other advances and fulfill their contractual

obligations. The quality of the loans’ portfolio is monitored on a systematic basis and provisions for impairment are

recognized for specific or other losses that might relate to the portfolio.

The Group applies effective controls and procedures and obtains sufficient guarantees and collaterals so as to

minimize the possibility of loss from credit risk.

Credit risk concentration

There are restrictions regarding the concentration of credit risk from the Banking Law of Cyprus and the relevant

directive issued by the Central Bank of Cyprus. According to these restrictions, banks are not allowed to lend more

than 25% of their capital basis to a single customer and to associated with him parties taking into account the effect

of credit risk mitigation. The Group due to non accounting for the amount of recapitalization at 31 December 2013,

presents a deficient capital base and therefore all credit facilities granted to customers exceed the above restrictions.

Maximum exposure to credit risk ignoring collaterals

The table below reflects the worst case scenario of credit risk exposure without taking into account any collateral

held. In order to estimate the effect of the risk, as stated above, for the assets included in the consolidated statement

of financial position the accounting standards were applied, as they are presented in the consolidated statement of

financial position.

Maximum exposure to credit risk:

2013 2012

€'000 €'000

Deposits with central banks (Note 19) 959.275 1.167.391

Deposits with other banking institutions (Note 20) 64.133 100.969

Loans and other advances to customers (Note 21) 13.363.755 13.920.431

Held to maturity investments (Note 26) 1.017.476 1.733.797

Other receivables (Note 49) 34.549 41.548

Total 15.439.188 16.964.136

Contingent liabilities (Note 47) 96.410 114.615

Commitments (Note 47) 575.854 687.248

Total not included on the consolidated statement of financial position 672.264 801.863

Total credit risk exposure 16.111.452 17.765.999

As shown above, 82.9% of the total credit risk exposure arises from loans and other advances to customers, 6.3%

from held to maturity investments and 6.0% from deposits with Central Banks.



68

50. Financial Risk Management (continued)

50.1 Credit Risk (continued)

Impaired advances

If the Group does not assess the recovery of the total amount of the capital and interest due according to the

contractual terms of the loan or the relevant agreement, it classifies these advances as impaired and classifies them

in Grade 3 (high risk).

Non impaired advances

The Group’s loans which were assessed individually and no impairment was identified are classified in risk tiers in

the way below:

Grade 1 (Low Risk):

Loans which were past due up to 90 days and are performing.

Grade 2 (Medium Risk):

Loans past due between 91 and 180 days.

Grade3 (High Risk):

Loans past due over than 180 days.

Advances which are past due but not impairment

Includes loans for which, even if the repayment of interest and amount due is past due according to the contractual

obligations, the Group after evaluation does not assess that they should be impaired, because of the amount of

collateral or/and the level of repayment of amounts due.

Advances with conditions that were renegotiated

The Group, where it deems as beneficial, renegotiates the terms of advances for cases in which customers request

so, as they are not in the position to repay according to the initial terms, either because of their adverse financial

position or any other reason.

During the year the Group proceeded with the renegotiation of the repayment terms of advances of €1.549.151

(2012: €1.047.771),that relate to housing loans to private individuals and corporate loans to medium-sized

businesses. There was no modification to the collateral of the loans since they are fully covered either with

collaterals or government guarantees.

Under the new Directive, restructuring of a client’s facilities covers any action that changes the terms and/or

conditions of the client’s facilities in order to deal with existing or expected difficulties of the client to service the

facilities in accordance with the existing repayment schedule.

According to the said Directive, a restructured non-performing facility remains classified as non-performing for six

months following the commencement of the new amortization repayment schedule of capital installments in relation

to credit facilities with modifications in their amortization repayment schedule, while for credit facilities with

gradual increase of the installment amount, the facility remains non-performing for six months following the first

month at which the highest installment is due. Exceptions to the above rules are cases where the modified

repayment schedule provides for a lump sum payment on maturity of 20% or higher of the outstanding balance (as

at the date of restructuring). For these cases, the facility remains non-performing until its maturity.



69



Advances which are past due but not impairment (continued)

A restructured non-performing facility also remains classified as non-performing for six months following the

restructuring in relation to overdrafts. After the six months, overdraft accounts will be classified as performing only

if their credit turnover (excluding credits relating to cheques returned unpaid and credits relating to disbursement of

loans) is equal to or higher than the interest charged for the above-mentioned period.

After the lapse of the above mentioned period for the classification of restructured facilities as nonperforming, the

facility will be classified as non-performing only if it fulfills the criteria for the classification of non-performing

facilities according to the said Directive.

Collateral

On the basis of the Group’s policy, the amount of credit facilities granted should be based on the repayment

capacity of the relevant counterparties. Furthermore, for the hedging and mitigation of credit risk the Group obtains

collaterals the nature of which is set by the Group’s policies.

The main collateral held by the Group includes mortgage interests over properties, pledging of cash, government

and bank guarantees, charges over business assets as well as personal and corporate guarantees.

The total ratio of loan coverage per type of exposure as at the 31.12.2013 (coveredwith real estate, financial

securities and government guarantees)

Collateral value/loan balance:

Coverage percentage/

exposure type

Housing Loans Consumer Loans

(incl. Current

account)

Medium-sized

Businesses

Municipalities and

Local Authorities

€'000 €'000 €'000 €'000

<20% 352.953 1.243.848 441.095 84.576

(20%-40%) 42.392 70.782 43.997 2.362

(40%-60%) 104.155 143.224 97.550 23.469

(60%-80%) 248.414 286.549 196.211 6.088

(80%-100%) 524.721 650.751 365.823 97.627

(100%-120%) 1.538.375 1.307.033 696.744 454.056

(120%-140%) 813.621 565.850 321.367 7.806

>=140% 1.051.147 697.859 395.628 487.682

Total 4.675.778 4.965.896 2.558.415 1.163.666

% Fully Secured 73% 52% 55% 82%



70



Ratio of Loans to Value (loan balance/market value of collateral loan/market price):

Ratio of loans to value (loan

balance/market value of collateral):

Ratio of loans to value (loan

balance/market value of collateral):

Percentage of the total loans with

property collaterals

€'000 %

<20% 1.052.076 7,87%

(20% - 40%) 1.885.245 14,11%

(40% - 60%) 2.071.816 15,50%

(60% -80%) 1.809.583 13,54%

(80%-100%) 889.500 6,66%

>= 100% 1.014.131 7,59%

Total 8.722.351 65,27%

The loan balance in relation to the total amount of advances to customers relates to those that did not have

immovable property as collateral.



71



31 December 2013 Loans and other

advances to

customers

Deposits with

other banking

institutions

Investments

held to maturity Total

€'000 €'000 €'000 €'000

Carrying amount 10.778.140 64.133 1.017.476 11.859.749

Individually impaired:

Grade 1 (low risk) 840.859 - - 840.859

Grade 2 (moderate risk) 714.557 - - 714.557

Grader 3 (high risk) 3.898.431 - - 3.898.431

Provisions for impairment (824.228) - - (824.228)

Carrying amount 4.629.619 - - 4.629.619

Advances with conditions that were

renegotiated 750.322 - - 750.322

Past due but not impaired:

Grade 1 (low risk) 640.882 - - 640.882


Grade 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



72



31 December 2012 Loans and other

advances to

customers

Deposits with

other banking

institutions

Investments

held to maturity Total

€'000 €'000 €'000 €'000

Carrying amount 13.246.414 100.969 1.733.797 15.081.180

Individually impaired:

Grade 1 (low risk) 6.171 - - 6.171


Grade 3 (high risk) 1.113.070 - - 1.113.070

Provisions for impairment (673.059) - - (673.059)

Carrying amount 556.707 - - 556.707


renegotiated 4.510 - - 4.510

Past due but not impaired:

Grade 1 (low risk) 510.174 - - 510.174


Grade 3 (high risk) 1.249.407 - - 1.249.407

Carrying amount 2.131.031 - - 2.131.031

Analysis of past due

0-30 days 524.529 - - 524.529

30-60 days 118.720 - - 118.720

60-90 days 91.481 - - 91.481

90 days+ 1.396.301 - - 1.396.301

Carrying amount 2.131.031 - - 2.131.031


renegotiated 46.165 - - 46.165

Neither past due nor impaired:

Grade 1 (low risk) 8.779.337 100.969 1.733.797 10.614.103

Grade 2 (moderate risk) 1.779.484 - - 1.779.484

Carrying amount 813 - - 813

10.559.634 100.969 1.733.797 12.394.400


renegotiated

528.775 - - 528.775

Balances after individual impairment

Collective impairment 13.247.372 100.969 1.733.797 15.082.138

Total carrying amount (958) - - (958)

Past due but not impaired: 13.246.414 100.969 1.733.797 15.081.180



73


50.2 Market risk

Market risk is the risk of financial loss arising from sudden changes in foreign currency prices, interest rates and

prices of equity securities and other securities. The risk is managed by the Assets and Liabilities Committee

(ALCO) so as to be maintained within acceptable limits.

For the efficient management of the risk from interest rate and exchange rate movements, the Assets and Liabilities

Committee has defined specific strategies and set limits on open positions for every risk.

Analysis relating to the position of the Group regarding foreign currency risk, interest rate risk and price risk is

shown below:

50.2.1 Currency risk

Currency risk is the risk of financial loss arising from sudden changes in foreign currency prices when there is a net

position (asset or liability) in one or more foreign currencies. The Management of the Bank sets open foreign

currency position limits, overnight and intra-day, on a total basis and for each currency separately which are

monitored on a continuous basis.

The tables below set out the Bank’s exposure to currency risk resulting from its existing open foreign currency

positions. Changes in exchange rates against the Euro used in the sensitivity analysis are based on historical

fluctuations in foreign exchange prices.



74


50.2 Market risk (continued)

50.2.1 Currency risk (continued)

31 December 2013 Euro

United States

Dollars

British

pounds

Other

currencies Total

€'000 €'000 €'000 €'000 €'000

Assets

Cash 86.292 7.097 5.726 1.722 100.837

Deposits with central banks 959.275 - - - 959.275


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


profit or loss 202 - - - 202

Available for sale financial assets 24.825 - - - 24.825

Investments held to maturity 1.017.476 - - - 1.017.476

Investment properties 254.990 - - - 254.990

Property, plant and equipment 331.864 - - - 331.864

Intangible assets 1.685 - - - 1.685

Other assets 47.167 - - - 47.167

Total 13.670.256 17.488 17.020 3.827 13.708.591

Liabilities

Amounts due to other bank

institutions 83.600 - - - 83.600

Deposits and other customer

accounts 13.417.755 25.890 27.403 6.101 13.477.149

Repurchase agreements 202.581 - - - 202.581

Other loans 74.206 - - - 74.206

Loan for the repayment of refugee

deposits 36.534 - - - 36.534

Other liabilities 127.624 - - - 127.624

Total 13.942.300 25.890 27.403 6.101 14.001.694

Equity (293.103) - - - (293.103)

Total liabilities and equity 13.649.197 25.890 27.403 6.101 13.708.591

Net currency position 21.059 (8.402) (10.383) (2.274) -

Sensitivity analysis

Change in exchange rate +% 5,0% 4,0% 6,0%

Impact on net profit € (420) (415) (136)

Impact on equity € (420) (415) (136)

Change in exchange rate -% 5,0% 4,0% 6,0%

Impact on net profit € 420 415 136

Impact on equity € 420 415 136



75



50.2.1 Currency risk (continued)

31 December 2012

Euro

United States

Dollars

British

Pounds

Other

currencies Total

€'000 €'000 €'000 €'000 €'000

Assets

Cash 75.983 7.593 6.607 2.354 92.537

Deposits with central banks 1.167.391 - - - 1.167.391


institutions 73.012 14.109 11.283 2.565 100.969


customers 13.246.414 - - - 13.246.414

Inventories 49.078 - - - 49.078

Properties held for sale 59.253 - - - 59.253


profit or loss 148 - - - 148

Available for sale financial assets 13.034 - - - 13.034

Investments held to maturity 1.733.797 - - - 1.733.797

Investment properties 296.068 - - - 296.068

Property, plant and equipment 358.595 - - - 358.595

Intangible assets 2.343 - - - 2.343

Other assets 49.963 - - - 49.963

Total 17.125.079 21.702 17.890 4.919 17.169.590

Liabilities


institutions 81.004 - - - 81.004

Deposits and other customer accounts 15.131.162 33.281 26.981 8.967 15.200.391

Repurchase agreements 201.458 - - - 201.458

Other loans 74.275 - - - 74.275

Loan for the repayment of refugee

deposits 36.534 - - - 36.534

Loan capital 20.110 - - - 20.110

Other liabilities 131.735 - - - 131.735

Total 15.676.278 33.281 26.981 8.967 15.745.507

Equity 1.424.083 - - - 1.424.083

Total liabilities and equity 17.100.361 33.281 26.981 8.967 17.169.590

Net currency position 24.718 (11.579) (9.091) (4.048) -


Change in exchange rate +% 5,0% 4,0% 6,0%

Impact on net profit € (579) (364) (243)

Impact on equity € (579) (364) (243)

Change in exchange rate -% 5,0% 4,0% 6,0%

Impact on net profit € 579 364 243

Impact on equity € 579 364 243



76

50. Financial risk management (continued)


50.2.2 Interest rate risk

Interest rate risk is the risk of decrease in the value of financial instruments or in net interest income as a result of

adverse movements in the market interest rates due to timing differences on the repricing of assets and liabilities.

The Group closely monitors interest rate movements and the repricing maturity structure of its assets and liabilities

and is taking all necessary measures for managing interest rate risk.

The tables below set out the Group’s exposure to interest rate risk. The Group’s assets and liabilities are presented in

the tables at carrying amounts based on the contractual repricing date for floating rate items or the maturity date for

fixed rate items.



77



50.2.2 Interest rate risk (continued)

31 December 2013

On demand

Within

three

months

Between

three

months and

one year

Between

one and

five years

Over five

years

Non-interest

bearing Total

€'000 €'000 €'000 €'000 €'000 €'000 €'000

Assets

Cash - - - - - 100.837 100.837

Deposits with central banks - 810.006 - 149.269 - - 959.275


institutions 4.377 54.462 5.294 - - - 64.133


clients (gross) 2.069.211 176.860 617.876 2.947.949 7.551.859 - 13.363.755

Inventories - - - - - 44.676 44.676

Properties held for sale - - - - - 83.321 83.321


through profit or loss - - - - - 202 202

Available for sale financial

assets - - - - - 24.825 24.825

Investments held to maturity - - - - 1.017.476 - 1.017.476

Investment properties - - - - - 254.990 254.990

Property, Plant and

Equipment - - - - - 331.864 331.864

Intangible assets - - - - - 1.685 1.685

Other assets - - - - - 47.167 47.167

Total 2.073.588 1.041.328 623.170 3.097.218 8.569.335 889.567 16.294.206

Liabilities


institutions - 77.860 - - - 5.740 83.600


account 2.719.776 6.582.221 3.133.199 23.639 1.018.314 - 13.477.149

Repurchase agreements - - - - 202.581 - 202.581

Other loans 243 11.784 41.291 - 20.888 - 74.206

Loan for the repayment of

refugee deposits - - - - 36.534 - 36.534

Other liabilities - - - - - 127.624 127.624

Total 2.720.019 6.671.865 3.174.490 23.639 1.278.317 133.364 14.001.694

Net position (646.431) (5.630.537) (2.551.320) 3.073.579 7.291.018 756.203 2.292.512

Net cumulative position (646.431) (6.276.968) (8.828.288) (5.754.709) 1.536.309 2.292.512

Loans and other advances to customers do not include the accumulated impairment provisions of €2.585.615

thousands.



78




31 December 2012

On demand

Within

three

months

Between

three

months and

one year

Between

one and

five years

Over five

years

Non-interest

bearing Total

€'000 €'000 €'000 €'000 €'000 €'000 €'000

Assets

Cash - - - - - 92.537 92.537

Deposits with central banks 150.332 1.017.059 - - - - 1.167.391


institutions 1.966 84.494 14.509 - - - 100.969


clients (gross) 2.032.599 195.220 701.808 3.342.428 7.648.376 - 13.920.431

Inventories - - - - - 49.078 49.078

Properties held for sale - - - - - 59.253 59.253


through profit or loss - - - - - 148 148

Available for sale financial

assets - - - - - 13.034 13.034

Investments held to maturity - - - - 1.733.797 - 1.733.797

Investment properties - - - - - 296.068 296.068

Property, Plant and

Equipment - - - - - 358.595 358.595

Intangible assets - - - - - 2.343 2.343

Other assets - - - - - 49.963 49.963

Total 2.184.897 1.296.773 716.317 3.342.428 9.382.173 921.019 17.843.607

Liabilities

Amounts due to other

institutions - 73.406 - - - 7.598 81.004


accounts 2.681.603 7.513.849 3.996.479 63.155 945.305 - 15.200.391

Repurchase agreements - - - - 201.458 - 201.458

Other loans 149 11.760 41.307 - 21.059 - 74.275

Loan for the repayment of

refugee deposits - - - - 36.534 - 36.534

Loan capital - - - - 20.110 - 20.110

Other liabilities - - - - - 131.735 131.735

Total 2.681.752 7.599.015 4.037.786 63.155 1.224.466 139.333 15.745.507

Net position (496.855) (6.302.242) (3.321.469) 3.279.273 8.157.707 781.686 2.098.100

Net cumulative position (496.855) (6.799.097) (10.120.566) (6.841.293) 1.316.414 2.098.100

The Loans and other advances to customers do not include the accumulated impairment provisions of €674.017

thousand.



79





An increase of 100 basis points in interest rates on 31 December 2013 would have increased equity and profit or loss

by the amounts shown below. For a decrease of 100 basis points there would be an equal and opposite impact on the

profit and other equity. This analysis assumes that all other variables, in particular foreign currency rates, remain

constant.

Equity Profit or loss

2013 2012 2013 2012

€'000 €'000 €'000 €'000

Impact 15.363 13.164 15.363 13.164

50.2.3 Investment price risk

The risk comes from adverse changes in current prices of the investments in shares held by the Group.

The Group invests mainly in the Cyprus Stock Exchange (C.S.E.) and classifies these investments as financial assets

available for sale, where the changes in the prices of these investments are recorded in equity.

50.3 Liquidity Risk

Liquidity risk is the risk of financial loss arising from potential inability of the Group to currently meet its current

payment obligations.

The Group monitors liquidity on a daily basis and is taking all necessary measures to manage this risk..

The following tables show the contractual undiscounted cash flows of financial liabilities based on the remaining

contractual period from the reporting date to their maturity.

31 December 2013

Carrying

amount

Contractual

cash flows

On

demand

Within

three

months

Between

three

months

and one

year

Between

one and

five years

Over five

years

€'000 €'000 €'000 €'000 €'000 €'000 €'000

Liabilities


account 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



80


50.3 Liquidity Risk (continued)

31 December 2012

Carrying

amount

Contractual

cash flows

On

demand

Within

three

months

Between

three

months

and one

year

Between

one and

five years

Over five

years

€'000 €'000 €'000 €'000 €'000 €'000 €'000

Liabilities


accounts 15.200.391 15.530.993 2.736.212 7.830.559 4.399.032 81.081 484.109


institutions 81.004 93.879 22.132 30.427 7.304 11.384 22.632

Repurchase agreements 201.458 204.500 - 204.500 - - -

Other liabilities 262.654 279.554 75.086 76.238 21.735 5.655 100.840

Total liabilities 15.745.507 16.108.926 2.833.430 8.141.724 4.428.071 98.120 607.581

50.4 Other risks

50.4.1 Capital risk management

The primary regulatory authority, which determines and monitors the Group’s capital requirements is the Central

Bank of Cyprus ( CBC). CBC is guided in its regulatory role by the recommendations of the Basel Committee and

the European Union instructions for banking matters.

In 2007, CBC published the ‘Unofficial consolidation of the directive for the calculation of capital adequacy and

large exposures of banks of 2006 and 2007’’with the last amendment taking place on July 2011, for the purpose of

harmonization with the European Union Directives on the Calculation of Capital Requirements and Large

Exposures (Basel II).

The Basel II directive consists of the following pillars:

Pillar I – Minimum Capital Requirements

Pillar I refers to the minimum capital requirements of the credit institution, so as the exposure of the Group to credit

risk, market risk and operational risk is adequately covered.

Pillar II – The supervisory review process

Pillar II links the regulatory capital requirements to the banking institutions’ internal capital adequacy assessment

procedures (ICAAP) and to the reliability of its internal control structures. The purpose of Pillar II is to promote the

communication between supervisors and banks on a continuous basis and to evaluate how well the banks are

assessing their capital needs in relation to their risks.

Pillar ΙΙΙ – Market discipline

Pillar III requires the disclosure of information regarding the risk management policies of the banking institution,

the results of the calculations of minimum capital requirements, as well as the results of the ICAAP together with

reports regarding credit risk.




50.4 Other risks (continued)

50.4.1 Capital risk management (continued)

81

In the context of legislative and regulatory demands for the connection of the Cooperative Credit Institutions (CCI)

into a central organization as per the instructions of the European Union, the Cooperative Central Bank Limited

assumed the role of central organization, defined as ‘Central Body’. The Central Body started to operate on 1

January 2008. The Bank, by assuming its new role of the Central Body in compliance with the European Directive

2000/12/EC (recast Directive 2006/48/EC) relating to the taking up and pursuit of business of credit institutions and

the Cooperative Societies Rules of 2004, guaranteed the commitments of affiliated CCIs so that the latter be

exempted from the regulatory provisions of the Directive on an individual basis. The above Directive and the Rules

provide that, the exempted provisions must be satisfied by the Central Body and the affiliated CCIs on a

consolidated basis.

The calculation of the capital adequacy of the Central Body is performed on the basis of the methodology agreed

with the Central Bank of Cyprus and relative disclosures, regarding the policies of risk management and results of

calculating capital adequacy, are published online in the webpage of the Cooperate Central Bank Ltd,

www.coopbank.com.cy.

The Group’s equity comprises of the two following tiers:

- Tier 1 capital: includes capital and reserves (including revaluation reserves)

- Tier 2 capital: including revaluation reserves

The capital adequacy of the Group, on an individual basis is monitored by the management every quarter. The

required reports are submitted every quarter to the CBC, for calculating the capital requirements and Large

Exposures on a collective basis.

On 16.12.2013, the CBC, with a letter modified the Directive on the Calculation of Capital Requirements and Large

Exposures (cancelation of amendment no. 2 of 2011), setting the minimum core tier 1 ratio at 9% as provided by the

Memorandum of Understanding with Troika. In 2014 and particular on 29.5.2014 the CBC with a new letter re-

defined the minimum core tier 1 ratio at 8%, a percentage which is in line with the harmonized ratio which will be

applied in the base scenario of the evaluation of the European Central Bank.

As at 31 of December 2013, core tier 1 ratio for the Central Body was calculated as 12,1% after the recapitalization

through state aid and after the final total provisions of approximately €2,58 billion. In the calculation of the ratio

the revaluation reserves have been included. If the revaluation reserves are not included, the ratio is calculated at

10.6%.




50.4 Other risks (continued)

50.4.1 Capital risk management (continued)

82

For the years 2013 and 2012, the Group complied with all capital requirements, as presented below:

2013 2012

€'000 €'000

Own Funds

Core Tier 1 capital 1.011.556 1.035.236

Total risk weighted assets 8.738.803 9.610.563

% %

Core Tier 1 ratio 12,10 10,80

Tier 1 ratio 9,00 8,3

50.4.2 Counterparty risk

Counterparty Risk arises from the risk of loss of funds due to the probability that a counterparty with which the

Group enters into a specific transaction, defaults before the final settlement of the transaction.

The Assets and Liabilities Committee of the Bank (ALCO) approved a specific model for the determination of

limits regarding the exposures in countries and banking institutions of Cyprus and abroad. The limits are mainly

determined based on the credit rating of the counterparty, as it is set by recognised international rating agencies and

based on the maturity period of the placement/investment. The model is revised at least annually or whenever the

economic conditions require.

The credit ability of the counterparties that are not assessed by recognised international rating agencies, is assessed

by the credit risk department of the Group based on internally developed methodology, which takes into account

quantitative and qualitative criteria. The credit risk department of the Group, monitors on a regular basis, any

changes of the counterparties’ credit ratings and of the countries with which the Group has set limits and distributes

timely the relevant information to the relevant departments for taking the necessary measures and corrective actions.

In addition a daily monitoring system has been set regarding the use and the conformity with the limits determined,

so as to identify actual and avoid possible breaches of the limits.



83

51. Fair value of financial instruments

Fair value represents the amount which an asset can be exchanged for or a liability settled at an arm’s length

transaction.

The majority of assets and liabilities are presented in their estimated fair value.

Fair value of loans and other advances is approximately equal to their book value in the consolidated statement of

financial position, net of the provisions for impairment.

Fair value of the remaining financial assets on the consolidated statement of financial position does not differ

significantly from their book value.

Fair value of the financial instruments traded in active markets such as the trading and available for sale

investments which are listed in stock exchange, is based on stock prices at the reporting date. The stock price used

for the financial assets held by the Group is the bid price. The appropriate stock price for financial liabilities is the

current ask price.

Measurements of fair value recognized in the consolidated financial position.

The table below analyses the financial measures carried at fair value, by valuation method. The different levels have

been defined as follows:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or

liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

31 December 2013 Level 1 Level 2 Level 3 Total

€'000 €'000 €'000 €'000

Financial assets

Fair value through profit or loss

Investment in shares 202 - - 202

Financial assets available for sale

Investment in debt securities - 10.252 - 10.252

Investment in shares 14.573 - - 14.573

Total 14.775 10.252 - 25.027



51. Fair financial value of financial instruments (continued)

Fair value measurement recognized in the consolidated statement of financial position (continued)

84

31 December 2012 Level 1 Level 2 Level 3 Total

€'000 €'000 €'000 €'000

Financial assets

Fair value through profit or loss

Investment in debt securities 148 - - 148

Financial assets available for sale

Investment in shares 13.034 - - 13.034

Total 13.182 - - 13.182



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52. Analysis of performing and non-performing loans

31 December 2013 Performing credit facilities

Total credit

facilities

Credit facilities

that were not

restructured

Credit

facilities that

were

restructured

Total

performing

credit facilities

Non-

performing

credit facilities

€'000 €'000 €'000 €'000 €'000

Credit facilities to legal entities

Commercial sector 313.528 199.331 5.720 205.051 108.477

Construction and Real Estate

businesses 217.194 53.584 19.437 73.021 144.173

Manufacturing businesses 98.774 16.330 2.065 18.395 80.379

Tourism businesses 81.162 42.972 5.254 48.226 32.936

Other businesses 761.833 646.839 2.298 649.137 112.696

Services 235.514 182.079 7.913 189.992 45.522

Credit facilities to legal entities in

retail

Commercial sector 246.336 113.083 19.273 132.356 113.980

Construction and Real Estate

businesses 435.080 135.302 44.899 180.201 254.879

Manufacturing businesses 139.237 60.055 9.092 69.147 70.090

Tourism businesses 61.140 20.808 5.564 26.372 34.768

Other businesses 165.197 83.807 8.060 91.867 73.330

Services 161.354 61.090 13.150 74.240 87.114

Credit facilities to legal entities

Credit facilities for the acquisition/

construction of property:

(α) Owner occupancy 4.622.457 2.469.490 431.079 2.900.569 1.721.888

(β) For other reasons 556.955 179.494 58.107 237.601 319.354

Consumer loans 4.272.406 1.512.308 366.873 1.879.181 2.393.225

Credit cards 30.126 21.392 - 21.392 8.734

Current accounts 559.912 292.932 2.586 295.518 264.394

Credit facilities to self-employed 405.550 113.527 22.167 135.694 269.856

Total facilities 13.363.755 6.204.423 1.023.537 7.227.960 6.135.795

Provision for impairment 2.585.615 437.108 159.740 596.848 1.988.767



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53. Loan portfolio analysis as at 31 December 2013 based on the date the loans were issued

Date of issue Total loan portfolio Advances to legal entities Advances to individuals for acquisiton/

construction of property

Advances to individuals- Other Advances

Total

advances

Non-

performing

advances

Provisions Total

advances

Non-

performing

advances

Provisions Total

advances

Non-

performing

advances

Provisions Total

advances

Non-

performing

advances

Provisions

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000

Within 1 year 1.519.833 640.103 473.818 358.449 178.262 129.269 310.539 72.298 59.060 850.845 389.543 285.489

1 - 2 years 2.993.024 1.007.517 348.508 530.913 178.386 38.801 1.180.860 310.382 111.493 1.281.251 518.749 198.214

2 - 3 years 3.116.916 1.536.541 522.878 438.897 232.778 56.261 1.388.794 546.676 171.871 1.289.225 757.087 294.746

3 - 5 years 3.491.847 1.591.982 556.740 1.124.177 270.389 59.609 1.283.840 608.612 213.461 1.083.830 712.981 283.670

5 - 7 years 1.081.984 640.397 269.268 179.194 110.250 34.824 516.911 252.609 89.500 385.879 277.538 144.944

7 - 10 years 641.676 334.725 188.803 129.534 69.970 33.470 267.505 105.204 54.190 244.637 159.551 101.143

Over 10 years 518.475 364.391 225.600 153.408 102.722 38.297 161.009 106.896 66.876 204.058 154.773 120.427

Private Individuals – Housing loans include facilities provided for the acquisition or construction of property for owner occupancy or other reasons

Private Individuals – Other loans include all facilities provided to private individuals



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54. Events after the reporting period

The major events relate to the approval of the restructuring plan of the Cooperative Sector, the agreement amongst

the Ministry of Finance, the Cooperative Central Bank and the European Stability Mechanism for the transfer of

€1,5 billions for the recapitalization of the Cooperative Sector and the transfer of its shares to the State, the

completion of the mergers of the cooperative institutions, the voluntary retirement plan for the Group’s employees

and the assessment of the quality of the assets of the financial institutions and the undertaking of the supervision by

the European Central Bank.

For the recapitalization of the Cooperative Credit Sector, on the 10 of March 2014 the Bank issued 1.171.875.000

shares, of total value €1.500.000 thousands to the Republic of Cyprus.

COOPERATIVE CENTRAL BANK LIMITED Committee of Cooperative Central Bank Limited (the ''Bank'')...

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