By Elias Hazou
BANK of Cyprus employees who took voluntary redundancy do not have access to the bank accounts where their provident fund cash is being held, the House finance committee heard yesterday.
As part of a €10bn rescue package from international lenders back in March, Cyprus agreed to wind down its second-largest lender Laiki, while savings in Bank of Cyprus (BoC) were seized in what’s known as a ‘bail-in’ to recapitalise the bank.
The bail-in of uninsured depositors – who lost 47.5 per cent of their cash over and above €100,000 – covered both personal savings as well as provident funds.
Following the haircut, early exit packages were offered to employees as an incentive to trim down the bank’s workforce and its operating costs.
In the redundancy package for BoC staff, the bank offered a bonus of 5+2 monthly wages, settling of all staff loans and dues before cashing in their provident fund, and other benefits not exceeding €150,000, while the bank employees trade union chipped in from its coffers with €15m, that works out at an additional €10,000 per redundant staff.
A large chunk of BoC employees’ provident fund has been turned into shares, turning them into stakeholders.
What remained of the provident fund cash after the ‘haircut’ was placed into accounts in BoC. But lawmakers heard yesterday that the beneficiaries could not access the money.
A Central Bank official informed MPs that the relevant bail-in decrees stipulate that the provident fund money may be used only to repay loans, but nothing else.
Under the decrees, the official said, the cash must remain in the bank and cannot be moved into current accounts as the ex-employees want.
MPs were told that making an exception for this group of shareholders might open the floodgates with other groups.
Additionally, legislators heard, there are legal questions as to whether the balance in the accounts belongs to current or ex-employees of the bank.
That’s because, in the wake of haircut, the old provident fund was dissolved and a new one set up.
Savvas Philippou, of the group representing former BoC employees, said that prior to their exit they had got assurances that they would receive the money.
Lawmakers pledged to work with the finance ministry and the Central Bank so that the provident cash can be released.