Cyprus Mail

Our View: BoC’s ELA repayment was blown out of proportion

THERE seems to be no end to the squabbling at the Bank of Cyprus. Perhaps this is inevitable given that most of the Cypriot board members are party appointees, some of whom could have a political agenda. Yesterday, for instance, we found out from the Phileleftheros front page story that €800 million of the €1 billion raised from the recent capital issue had gone to the Central Bank to pay off part of the emergency liquidity assistance debt that was inherited by the bank from Laiki, without the board of directors being informed.

Members of the board, whom the paper did not name, complained that such a big transfer could have been made without the board knowing anything of it. An internal investigation had been ordered to establish the procedures followed for the transfer of the money, while the board wrote to CEO John Hourican demanding to know who had sanctioned the payment without seeking its approval or informing it. While this may be a legitimate complaint by the board, why did it publicise a matter which should have been dealt with internally to protect the bank?

The leak to the press may have had something to do with the letter Governor Chrystalla Georgadji sent to the board earlier this week asking all the directors to step down so that elections for a new board could be held at the next AGM. She also asked the board not to take any ‘strategic decisions’ in the meantime. Her decision was taken because the bank’s new shareholders would want seats on the board and rather than ask for only a third of the directors to step down as the regulations stipulated, she thought it would be better for all of them to quit.

Perhaps, she thought it was a good idea to reduce the seats on the board from the current 13.

The decision obviously angered political parties because their appointees would be removed from the board. Both the Disy and Diko leaders slammed the repayment decision, while the latter said he would table the matter for discussion in the House. Neither could tolerate the fact that the governor had told their appointees to step down, especially as the parties would have much less power to shape the composition of the new board now that Legacy Laiki’s stake – controlled by the politicians – in the bank has been diluted. The parties’ representation and power on the new board would be diminished, which is why the leaders have been attacking the governor’s decision.

For everyone else, reducing or excluding the party placemen from the bank’s board could only be described as a very positive development. Party placemen do not take decisions that are necessarily in the interest of the bank. These directors had done everything in their power to block the capital issue that would have strengthened the bank, because they feared their seats would be in danger. And now they have leaked a story that is harmful to the bank, the interests and standing of which they should have been protecting, because they did not like the governor’s decision.

If proof were needed that it was the correct decision, this is it.

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