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Our View: A positive development for Cypriot banking

Former Hellenic Bank CEO Makis Keravnos

HELLENIC BANK has been in the market in search of a new CEO and according to the chairperson Irena Georgiadou the bank was close to identifying the person that will replace Makis Keravnos who had decided to step down several months ago. His contract expired at the end of last month and he had decided that he would not seek its renewal, after nine years at the helm.

Keravnos’ appointment as CEO, nine years ago, was a big surprise as he had no banking experience whatsoever, nor had he served in a senior management position in any big organisation before. He had been a middle-ranking manager in a state agency, before being appointed labour minister and the finance minister, a post he held for a little over a year. However, he was politically well connected and had the approval of the then governor of the Central Bank as well as the support of the Church which was Hellenic’s main shareholder at the time.

Under his leadership, the bank seemed to plod along, but at least he did not invest in big quantities of Greek government bonds like the other two Cypriot banks. Its Greek operations were a failure and Hellenic, in contrast to the Bank of Cyprus, was grateful that it was able to unload them in the March 2013 fire-sale. At least the capital requirements of the bank were funded by the private sector and there was no need for a deposits haircut. This led to the Church’s shareholding being radically reduced and 45 per cent of the shares coming under the control of two foreign companies – Third Point and Wargaming.

Although Keravnos’ departure was said to have been by mutual consent, it was always on the cards once the foreign firms took control. It was highly unlikely they would be content for the bank, in which they had invested hundreds of millions, to be run by a CEO of limited banking experience who had acquired his knowledge on the job. In fact, we are unlikely to see an appointment of amateurs again in the banking sector that is now controlled by foreign investors. They will seek bankers with a proven record and not feel obliged to recruit individuals from the local market. Hellenic said that it had commissioned an international recruitment firm to find a replacement for Keravnos.

This is a positive development for Cypriot banking, because foreign bankers apart from their broader experience are able to introduce new ideas and practices that would help revitalise a struggling sector. Their lack of ties with the political and business establishment is also a big advantage. We only have to look at the Bank of Cyprus. The hiring of John Hourican – a banking high-flyer – as CEO was the best thing the bank’s board had done, even if it ended up clashing with him. In less than a year he has managed to put the bank on a sound footing and banish all doubts about its future. Hellenic would do well to follow the example of its competitor.

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