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Deadlock over BoC layoff scheme

By Elias Hazou

NO WHITE smoke emerged from the Presidential Palace yesterday after a high-level meeting to discuss, among others, an early retirement scheme for Bank of Cyprus (BoC) employees.

Attending were President Nicos Anastasiades, the Central Bank governor, the finance minister and the bank’s interim chairman.

The meeting, lasting two hours, was convened by the president who had asked to be briefed on the ongoing restructuring of BoC, the island’s largest lender.

The BoC chairman also updated President Anastasiades on the ongoing talks between the bank and the bank employees union on an early retirement plan.
No statements were made afterwards.

There have been mixed reports as to how close to a deal the bank is with the union. BoC’s board of directors will today likely discuss the subject and announcements could be forthcoming.

After the winding down and folding of Laiki Bank into BoC, the latter’s workforce has now exploded to some 5,500.

BoC, which is under restructuring by the Central Bank, must slash its payroll and thus its operating costs. The bank reportedly intends to reduce staff by about 1000 to 1500 through early retirement plans. For the remaining employees, an up to 15 per cent cut in salaries has been mooted.

The bank’s monthly payroll currently amounts to €25m.

A sticking point in the talks is the fate of the bank employees’ provident funds, which have suffered a ‘haircut’ along with uninsured deposits.

Provident and pension funds are not covered by the Deposit Protection Fund, but the government has pledged to limit the losses of provident fund members to around 25 per cent of the amount they would have received before the EU decision to restructure the two Cypriot banks.

Previously the finance minister has said around 40 per cent of the funds would be covered by bailout money, and 35 per cent credited to the Social Security Fund, to be collected when a person reaches retirement age. In effect, it represents a partial nationalisation of the affected provident funds.

The government has declared that it reached a deal with international lenders to transfer the assets of all provident funds from Laiki to BoC. Parallel to this, a mechanism for reimbursing any losses arising from the deposit-to-equity swap within BoC is being prepared.

Participation in the programme would be mandatory for provident funds in Laiki while those in BoC would have a choice: either to participate in the scheme by handing over BoC shares of equal value or keep their shares and stay out.

The bone of contention is that the bank employees union ETYK insists the provisions of the early retirement scheme as well as any salary reductions are bundled with the provident fund arrangements in an all-in-one deal.

The government, it’s understood, says the two issues should be kept separate. And it has stressed that the early exit plan for bank employees should not be such necessitating an increase in the ‘haircut’ for uninsured depositors in BoC, who have already ‘lost’ 37.5 per cent of their savings over and above €100,000.

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