Otros factores

Even though the co-operative practice, especially among farmers, has existed since the ancient times, the co-operative movement in Cyprus began, in 1909, about 60 years after the European one because of the difficulty in building up enough initial capital and because of the apathy that was caused by peoples’ fear and disappointment from the money-lenders’ power and actions (CSSDA, 2004). The co-operative movement in Cyprus was created in 1909, “placing man, his needs and his problems at the centre of its attention” (CSSDA, 2004, p.73). The first official step in the creation of co-operatives, in Cyprus, was taken in 1914, when the "Law 13 for Co-operative Credit Societies" was approved, enabling farmers to form co- operatives (CSSDA, 2004) (in comparison, this step in Greece, took place in 1993 (Karafolas, 2005)). After this, the establishment of the Agricultural Bank, in 1925, led to the creation of an even larger number of co-operative societies as it lent money to local co-operative financial institutions which, in turn, granted loans to farmers (CSSDA, 2004). After independence, in 1960, co-operatives in Cyprus grew stronger (Bijman et al., 2012a) as they were considered a necessity for the restriction/elimination of social problems, for the increase in the cohesion and unity of society and for fighting poverty and financial exclusion (CSSDA, 2004). Moreover, co-operatives were necessary because money-lenders and merchants, taking advantage of illiterate farmers, charged interest at rates as high as 600%, instead of the official interest rate of 12% (CSSDA, 2004). Today, co-operatives in Cyprus offer a complete range of financial services and products including, loans for housing, education, health and business (CSSDA, 2004), deposits, current accounts with or without cheques, credit and debit cards, buying and selling of foreign currencies, insurance services, internet banking as well as ATMs (Co- operative Central Bank Ltd, 2012).

With regards to the status of Cypriot co-operative financial institutions in relation to the European ones, in 1996, Cypriot co-operative credit institutions were harmonized with the European Directive on Money Laundering enacting the Law on the Prevention of Money Laundering (CSSDA, 2004). Moreover, during the years between 2001 to 2007, the co-operative movement harmonised the Co-operative Societies’ Legislation with the European Directives on credit institutions (CSSDA, 2004) and the European Directive putting in place their own Deposit Guarantee Scheme in 2000 (CSSDA, 2004). In addition, since 2003, co-operative financial institutions have aligned with the provisions of the European Section on State Aid, when it was agreed to tax the portion of profits that result from transactions with non-members (CSSDA, 2004).

Cyprus follows the traditional governance model (Section 2.2.2), thus, General Meetings (the supreme body in a co-operative) are where members’ control is expressed (Erakleous, 2007; CSSDA, 2014a). Annual General Meetings can be summoned by the Board of Directors (Erakleous, 2007) within three months from the receipt of the audited financial statements (CSSDA, 2014a). Additionally, an Extraordinary General Meeting can be summoned by the Board of Directors or the Commissioner of CSSDA (CSSDA, 2014a). The members have the right to attend both regular Annual Meetings and the Extraordinary Meetings (Erakleous, 2007). In the General Meeting, decisions on any subject that concerns a co-operative can be taken and are binding on all members (Erakleous, 2007). During an Annual General Meeting, members have the power to assess the actions (or the lack of actions) of management in the period since the previous General Meeting (Erakleous, 2007). In practice, during an Annual General Meeting, the members present can approve the financial statements (CSSDA, 2005; 2014a; Erakleous, 2007), examine any member complaints, regarding the fairness of the Board of Directors’ decisions, (CSSDA, 2005; Erakleous, 2007) and decide how the profits of the previous year will be distributed (Erakleous, 2007; CSSDA, 2014a). Moreover, at the General Meetings, the members ensure that their co-operative has followed the legal framework and the co-operative principles and that the decisions taken in previous General Meetings have been implemented (CSSDA, 2005). Additionally, members

vote for the Board of Directors and they approve the appointment of the external auditors of the co-operative (Erakleous, 2007). Overall, during a General Meeting, members decide about the dissolution of their co-operative and they have the legal right to deal with any issue which concerns their co-operative (Erakleous, 2007), including any governance-related problems.

Concerning the Cyprus co-operative movement’s institutional bodies, these include the Committee and the Commissioner of Co-operative Societies’ Supervision and Development Authority (CSSDA), the Co-operative Central Bank Ltd, the Co- operative Societies’ Audit Service and the Pancyprian Co-operative Federation Ltd (CSSDA, 2004). The Co-operative Central Bank Ltd was created in 1937 and since then, it has acted as the central banker and the ‘lender of last resort’ for the co- operatives (CSSDA, 2004). Since 2003, the Co-operative Central Bank has also acted as the Central Body for all the co-operative financial institutions that either meet the minimum preconditions - but do not want to operate independently of the rest of the co-operative financial institutions- or do not meet them and hence affiliate with the Central Body in order to meet the threshold on a consolidation basis (CSSDA, 2004).

Finally, co-operatives in Cyprus declare that they follow the co-operative principles and values. This is evident by the central focus of co-operative principles and values in the publications of various member organizations of the co-operative movement in Cyprus. For example, CSSDA has published a 23 page long booklet, which sets out the history of the co-operative movement in Cyprus, devoting three pages to explain the co-operative principles and values (CSSDA, 2004, 2005). Furthermore, the Co-operative Central Bank has devoted three pages in each of the two booklets prepared for the Education Fairs of 2008 and 2010, setting out and explaining the seven co-operative principles, (Co-operative Central Bank Ltd, 2008; 2010). Additionally, four pages of the booklet that was prepared by the Pancyprian Co-operative Confederation, as part of the celebrations for the 100 years of co- operative presence in Cyprus, focused on the co-operative identity, principles and values (Pancyprian Co-operative Confederation, 2010). Finally, the Co-operative Central Bank Ltd, the Cyprus Turkish Co-operative Central Bank Ltd and the

Pancyprian Co-operative Confederation are all members of the International Co- operative Alliance (ICA), indicating that co-operatives in Cyprus adhere to the international co-operative principles and values (ICA, 2012b).

Having explained the relevance of Cyprus as the geographical area for the proposed research and having set out information about co-operatives and the banking industry in Cyprus, it could be argued that the best context in which to test their adherence to the co-operative principles is the financial industry. This is because the effects of the 2008 financial crisis are still being felt and academics and commentators are still voicing their requests for changes in this industry, inevitably putting pressure on all organisations that operate in it, including credit unions. But before this, the present research will pause so that the issue of whether Cypriot financial co-operatives are credit unions will be examined.