By Loucas Charalambous
IT IS FAIR to say that DISY chief Averof Neophytou was right about most of the things he accused the banks of at his news conference on July 24.
The behaviour of the management of the banks today is very far away from what we would have expected, with ample justification after last year’s collapse and recapitalisation through the seizing of a big chunk of deposits, not to mention the wiping out of shares and bonds.
It must be mentioned that, despite everything that happened and in spite of their unforgivable actions which caused misery to thousands of people that had trusted them, everyone agrees the banks should be helped to return to normalcy. Not because this would be just or deserved, but because, unfortunately, it is necessary.
This concession, however, should not be construed as condoning the methods and practices followed by the banks, which in some cases are inhuman. There have been many reports by borrowers who had gone to the bank to discuss restructuring a loan and were met with hostility and arrogance.
For example, people with loans who have requested a restructuring – sincerely seeking an arrangement that would allow them to gradually repay their dues – have encountered totally unreasonable demands from the banks such as additional security, new guarantors, new collateral and higher interest rates.
In addition to this, banks are also trying to introduce unfavourable terms on loan contracts. One such term gives the bank the right to unilaterally terminate an agreement and demand full repayment even if the customer has been making the repayments agreed to in the restructuring. It would appear that in these cases, the bank, apart from everything else, wants to keep the customer’s head under the guillotine, threatening to chop it off at any moment.
Who in his right mind would agree to such an arrangement or a new loan on these terms? How can anyone do business in the knowledge that the bank could at any moment stop it and demand full settlement of his loan? How can any businessman plan his operations with this threat looming?
This behaviour by bankers, especially under today’s circumstances, is provocative to say the least. And one wonders what the point is. If the objective was a friendly and fair arrangement for the repayment of a loan then this type of behaviour achieves the exact opposite.
If the plan is for banks to take over as quickly as possible the properties used as collateral, they will find out, if they pull it off, that it will be just a drop in the ocean of debt. The result will be properties with very low sales value that the banks will have difficulty selling.
Nobody disagrees with pressuring those who have been taking advantage of the situation and are refusing to repay their loans despite having the funds. But the banks must differentiate between those who are compliant and those that are not. After all, the banks should not forget that they caused this problem with their greed and irresponsibility.
Worst of all is that while this heavy-handed behaviour by the banks is taking place, none of those responsible for the collapse of the banks is in jail or have been made to pay for their crimes.
Last week, the Bank of England announced tough punitive measures against those responsible for the collapse of the Royal Bank of Scotland and Lloyds, including the return of the bonus payments of seven years.
Nothing of the sort has happened here. On the contrary, some of the main culprits for the banking disaster have the audacity to appear on television and give us advice on how we will climb out of the abyss into which they threw us.