Cyprus Mail

CBC’s definition of NPLs is ‘foolish’ and will prolong recession, says BoC CEO

By Constantinos Psilides

THE new chairman and the chief executive of the restructured Bank of Cyprus have apologised to shareholders for their predecessors’ mistakes promising to restore public trust in the bank, but that the problem of the non-performing loans must also be resolved very soon to release funds and get the economy rolling again.

Chairman Christis Hasapis, who was elected during the turbulent AGM in September that replaced the entire past board and management with new faces, and CEO John Hourican both apologised at the shareholders’ meeting and said they would strive for a better future for BoC and to restore confidence.

“We apologise to the country, we apologise to our shareholders and we apologise to our depositors”, said Hasapis, saying that he hoped the BoC stock would be reinstated and the share price rise once again.

Trading on the Cyprus and Athens stock exchanges were suspended after the Eurogroup decision to impose a bail-in on depositors in order to recapitalise the bank from own funds and not seek any part of the bailout money destined for the economy. Once the recapitalisation was concluded and new shares issued, the stock is expected to resume trading in the first week of February 2104.

However, Hourican said that for the major outstanding issues of non-performing loans (NPLs) to be resolved, the central bank’s “foolish” definition must be changed, as this trapped vast amounts of capital and will probably prolong recession.

The two men also argued in favour of changing Cypriot banks’ policies on lending, saying that it should be based on whether the prospective borrower is viable and has the ability to pay off the loan and not on securities provided. “BoC found itself with a large number of securities, consisting of homes and land that the bank doesn’t want to liquidate because it will cause problem to the economy, the bank and its stockholders”, Hasapis explained.

Hourican assured the shareholders that there is no problem with the banks’ liquidity.
Hasapis promised that the board will soon establish a committee that will be tasked with addressing the issue of all stockholders who lost money when the bank stock plummeted after the March Eurogroup decisions.

Asked about the process to merge the operation of the now defunct Laiki Popular bank, Hasapis said this will be completed within 2014.

In his speech, Hourican admitted that the BoC is to a point “hostage” of the Cyprus financial process and that a prolonged recession could potentially derail its restructuring.

“We understand the disappointment and frustration our customers, stockholders, depositors and employees feel. The new management will do everything in their power to ensure that with the passing of time trust is rebuild with all interest parties”, he added.

The banks’ CEO asked the public to understand that the bank cannot recover if it can’t collect interest and capital on loans. “This is a foundation of the banks’ recovery and in extension that of the Cyprus economy.”

The bank’s legal advisor, Polys Polyviou, asked by shareholders why the bank didn’t resort to the immovable property commission (IPC) to be compensated, said that although the bank has vast properties in the occupied areas, the decision was a correct one both for legal and national reasons.

Asked whether the bank can sue the Greek state based on a bilateral agreement to protect investments that were lost after the haircut on Greek government bonds, Polyviou said that the previous board did not authorise such action following meetings both with the Cypriot and Greek governments. “The matter is still open”, he said.
Hasapis also said that the bank’s restructuring plan was underway, as it was approved by the Central Bank on November 26 and that the management is in the process of implementing it.

“Our vision is one of a healthy bank, fully capable of responding to customer needs and the expectations of its shareholders. A bank that can play a pivotal role in the recovery of the Cypriot economy”, he added.

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