WHEN the Resolution Authority handed over the Bank of Cyprus to its new shareholders and they elected a new board of directors, which promptly hired a new CEO, we had thought the bank would soon be on the road to recovery. Perhaps this was over-optimistic, given the massive scale of the problems it was facing. Apart from the toxic assets that had to be dealt with, the bank also had to regain public trust and confidence, which had been completely shattered by the deposits haircut and the revelations about the recklessly irresponsible way in which it had been run for years.
Eight months later nothing appears to have been done and the bank is constantly on the front pages of the newspapers for the wrong reasons. The directors are divided over how the bank’s toxic assets should be dealt with. There is a meddling chairman, with no experience or practical knowledge of banking acting like a chief executive, the board has been at odds with the CEO and decided to open a position for a deputy CEO, while non-performing loans (NPL) have been rising reaching 50 per cent of the bank’s loan portfolio. Yet the board had been unwilling to move NPLs to a bad bank and when the CEO mentioned this possibility in an interview, there was a denial from the board, sparking rumours that it was protecting the big developers.
And if confirmation, that all was not well at the bank, were needed, it was provided by President Anastasiades who invited the directors to the presidential palace for a meeting. Immediately after the meeting, the chairman announced that a bad bank would be set up to take care of the NPLs. Was the president now running the Bank of Cyprus and the management was taking orders directly from him? Or perhaps it is the Central Bank governor, who reportedly instructed the board to abandon plans to hire a deputy CEO?
Yesterday there were press reports that the bank was considering covering its capital needs, ahead of the planned stress tests, with a share issue of €500 million. There was a lot of interest from hedge funds it was reported, but Russian directors were opposed to this because it would dilute their shareholding. This would curtail the powers of Cypriot directors who were also opposed to the idea of the European Bank of Reconstruction and Development being given the voting rights of Laiki, for the same reason.
These are just a few examples of the chaotic disarray in which the Bank of Cyprus finds itself in since the new board of directors was elected last year. Eight months later, the board has failed spectacularly to give direction to the struggling bank, let alone take the difficult decisions necessary to put it on the road to recovery. As for regaining the trust and confidence of the public, this could only be mentioned as a bad joke.