IF THE Bank of Cyprus is eventually saved and becomes a normal bank again, it would be by some miracle or divine intervention. It would certainly not be thanks to the gang of clueless mediocrities currently starring in the comedy show known as the restructuring of the bank.
As usual, we are being extremely naive in thinking that the man in charge of the restructuring – Central Bank Governor Professor Panicos – knows what he is doing and would do an adequate job. Yet the truth is that he has blundered his way along for the last year and a bit, making a bad situation in the banking sector worse.
We should also remember that he was not chosen as Governor by some wise leader but by the village idiot, whose piss-poor judgment and low intelligence led the country to mega-mess it is in today, because he was an AKEL sympathiser and had written articles praising the deluded leader’s insane economic policies.
Now we hear that that the man with the job of saving the B of C committed another super-blunder when he negotiated the donation of the Cypriot banks’ operations and assets to Greece’s Piraeus Bank (B of P) last March. This blunder left the bank with an additional exposure of €700 million.
I REFER to the letters of credit and letters of guarantee that had been issued by the Greek branches of Laiki and the B of C. For a bank to issue these, it usually secures some form of collateral from its client, either in the form of cash, shares or real estate.
When the smart professor negotiated the sale of the two banks in Greece, the letters of credit or guarantee stayed with the B of C while the assets used as collateral for them were transferred to Piraeus Bank. So now the B of C has to honour letters of credit and guarantee totalling €700 million without having legal access to the collateral provided by the client.
When Panicos set up the deal with the Greeks, the letters of credit and guarantee should have been transferred to B of P as a matter of routine but he did not think of it and now the Greek bank does not want to know. It has told the B of C it would deal with the matter on a case by case basis, which means that it would leave the problematic guarantees to ‘of C’ to pay.
So far, B of P has agreed to take guarantees of a value of €300m that are backed by super-solid collateral and left the remaining €400m to the B of C to pay. This is another illustration of Professor Panicos’ cluelessness and incompetence, which he might have a bit of trouble blaming on anyone else, as he normally does.
Perhaps, the insane arrangement to transfer the collateral to ‘of P’ and leave the payment obligation to ‘of C’ was a political decision by the Eurogroup and the nutty professor, once again, was blameless.
THE SAME blunder was committed in the takeover of Laiki by the B of C. Some €700m worth of letters of credit and guarantee were left with the former while the assets used as collateral were transferred to the latter. The Laiki administrator has been trying, unsuccessfully, to persuade the B of C to take on letters. Apparently the B of C has taken the same stance as Piraeus – it told Laiki that it would deal with the matter on a case by case basis. Was this cock-up also a political decision by the Eurogroup that Panicos could do nothing about?
One very senior ECB official remarked that the former Governor was “arrogant but intelligent”, while the current one was “compliant but limited,” which says it all.
WHEN the professor has no time to mess up the slim prospects of recovery of the B of C, his bickering appointees on the board, many of whom have their own agenda, take over. Many of the directors have even less knowledge about how banks operate than the Governor who appointed them.
“We have already watched this movie,” is the remark of senior Laiki staff, with regard to what is going on at their new employer. A weak and ineffective Laiki board of directors sat back and did nothing even though everyone could see the collapse approaching.
Chairman Sophocles Michaelides, who had an undistinguished career as a Central Bank pen-pusher, sees the job as an opportunity to raise his public profile and show that he is somebody. Now the administrator – a person with decades of banking experience – has been removed, the self-regarding Sophocles is in charge of the bank, although still taking orders from the Governor.
He celebrated this promotion by appearing on radio and TV shows to inform us of his grandiose plans for the bank. On Wednesday night he was Tsouroullis’ guest on Sigma TV and announced that 2,500 bank employees would be made redundant, but as it turned out he did not know what he was talking about.
The next day bank employees union ETYK issued a statement putting the chairman in his place, saying the B of C administration admitted that this was wrong. According to the statement, Sophocles told ETYK there was no study on the future of the bank so there could be no forecast about staff numbers, currently at 5,640.
IT GETS worse, Sophocles did not object to ETYK announcing he did not know what he was talking about, because he realises that the union’s megalomaniac boss, Loizos Hadjicostis will be a big player at the B of C, once the restructuring is complete.
I hear that as a result of the bail-in of depositors, ETYK will be the bank’s second biggest shareholder, after Laiki. ETYK’s uninsured deposits (staff provident fund) were even bigger than those held by Russian businessmen. This may explain why Hadjicostis is calling the shots and publicly reprimanding the bank chairman.
So would Sophocles, who wants to remain chairman after the restructuring, sanction any measure that the second biggest shareholder of the bank would not approve of? I suspect no decision about redundancy numbers, redundancy compensation and branch closures would be taken without Hadjicostis’ approval, something guaranteed to restore public confidence in the B of C.
SO FAR Hadjicostis has sanctioned the staff pay-cuts which penalise the highest earners the most in keeping with union policy which wants as little difference as possible between the salary of a general manager and a messenger. But there is disagreement over the compensation to be paid to staff that would leave ‘voluntarily’.
In the banking sector, like the state sector, getting rid of staff against their will is not permitted by the unions. Those who would volunteer to leave would be those with long service and high salaries as they would be entitled to big compensation – Hadjicostis is demanding a month’s salary for every two years of service. Under the scheme someone with 30 years of service would receive 15 months’ salaries, when he volunteers to leave.
Only in Kyproulla, would a bank be paying such big redundancy compensation without having a say over who it would sack. Hadjicostis is also demanding that those who leave should receive 85 per cent of their provident fund, even though 40 per cent of it was lost in the bail-in. In other words he wants the bank to pay an extra 25 per cent from its own funds to cover the hair-cut shortfall in addition to the monthly salaries.
In the end, the bank might have a better chance of surviving if it made nobody redundant, because it might be cheaper than paying the compensation packages demanded by its second biggest shareholder.
WHILE this is all going on, the recently-appointed CEO Christos Sorottos is away on holiday and has not bothered to call and find out what is happening at the sinking ship he was hired to save. He has left Panicos and Sophocles to obey the diktats of Hadjicostis.
The ETYK bully, for instance, insists that positions in the restructured bank should be shared equally between Laiki and B of C employees, as should the redundancies. This diktat is being loyally followed by the Central Bank apparatchiks monitoring events at the bank and reporting to Panicos. The first thing CB apparatchiks will always raise, at committee meetings dealing with restructuring issues, is why there are fewer representatives of Laiki – another sad reminder that the Governor does not have a clue.
PREZ NIK’S letter about helping save the B of C did not go down well with our EU partners, all of whom responded in a condescending and didactic tone as if they were reprimanding a naughty kid that refused to eat his broccoli.
The message was very clear – broccoli is good for us and we had to eat it, because there was no way the menu would change. Perhaps in a few years’ time – the medium term – they would also let us eat some cherries, but first we had to eat the broccoli. German papers were scathing about the letter, accusing us of ‘sulking’.
The hostile reception may explain government spokesman Christos Stylianides’ announcement that we did not want to change the terms of the memorandum, just “resolve practical problems.” How ironic that the government was asking for help from the EU to save the B of C, while at home it was doing nothing to save it from Panicos, Sophocles and their overlord Loizos.
WHO WOULD have thought that a fine upstanding citizen, like Ttooulis Ttoouli of Avgorou, who served his country from so many posts and was always at the forefront of all our national struggles, could have his name dragged through the mud by sensationalist reporters keen to sell a few extra newspaper copies?
The great patriot, Ttooulis had done so much for this country – he was paid well for his services by the taxpayer, but that is beside the point – he should have been untouchable, commanding everyone’s respect. Politis, which broke the story, forgot that he was known as the ‘Mother Teresa of Cyprus’ when he was minister of interior, distributing money and love (not his own) to the poor and destitute.
We were shocked that the Attorney-General ordered a police investigation into the transfer of one million euro in July 2007, into an account in a Greek bank, held by the company AC Christodoulou Consultants Ltd, owned by his daughter Athina, a very well-known business consultant who charges premium rates for her services.
The payment for consultancy services was made two and a half months after Ttooulis stepped down as Central Bank Governor, by a Greek shipowner, with allegedly close ties with Andreas Vgenopoulos, the man who bankrupted Laiki.
But so what? A respected consultant like Ttooulis’ daughter could offer business consultancy services to whomever she chose. Our establishment had once tried to secure her services but we could not afford her fees.
The consultancy firm passed into the ownership of her father, in 2010, a long time after the million euro payment, conclusive proof of Ttooulis’ innocence. The only tiny blemish on Ttooulis’ outstanding career of honesty and public service was the letter sent by Vgenopoulos to the president of the Republic in 2007, urging him to give Ttooulis another five-year term as Governor of the Central Bank.
Then again, Vgenopoulos, despite all his faults, could always spot a good CB Governor. He never got on with Orphanides but I am sure he would have loved Panicos as much as he loved Mother Teresa.