The government yesterday continued to pile on the pressure on Bank of Cyprus to bolster its capital ahead of EU stress tests in the autumn.
The pressure has been mounting since last week when Finance Minister Harris Georgiades approached the issue in a softly-softly manner but by Friday it had ballooned into full-blown threats from the central bank to replace half the board.
The bank board has openly split into two factions creating friction between CEO John Hourican’s ‘side’, which favours a capital increase, and those led by chairman Christis Hassapis who oppose the idea.
Those board members, who represent unwilling depositors-turned-shareholders following a bail-in on uninsured deposits in March 2013, say a new share issue would dilute their holdings.
They want time to raise the cash needed but the central bank is opposed, fearing a new influx of Russian money but the stress test is looming and the bank’s non-performing loans portfolio is running at close to 50 per cent. The dispute is also doing untold damage to the bank’s image. There’s a lot of talk about restoring confidence in the bank but what’s going on at the BoC only results in the opposite.
The position of the shareholders is understandable as they would be penalised for a second time, but it’s hard to see what other choice there is.
On Sunday, one of these shareholders – Archbishop Chrysostomos said: “Our country has suffered enough. Many have lost their life savings in the banks and there is no need for further contraction. We don’t need to destroy the country,” he said.
He was right. It was not only bank depositors who suffered in the bailout. The fault lies even less with those left unemployed or those who have seen their wages and standard of living plunge without ever having had enough money in the bank to suffer a haircut.
The situation is not fair on the shareholders but it also wasn’t fair that the whole country has suffered at the hands of the banks and the inability of the previous administration to make decisions that might have stopped the need for a bailout in the first place.
Let’s hope the central bank will do its job properly this time around and follow through for the good of everyone. If piling on the pressure is not enough, then it must step in and do whatever it takes and not bow to the kind of populism that caused this mess in the first place.
Or, as Georgiades put it yesterday: “The lessons of previous years should lead us to a different conclusion, namely that banks and bankers cannot be left unchecked by the oversight authority, without expressing the state’s interest, resulting in the disasters of the recent past,” he said.
Indeed. The people of Cyprus have seen enough of banks running rampant for one lifetime.