A banker for almost fifty years is in charge of winding up what was Laiki. THEO PANAYIDES meets a man who rues the day banking in Cyprus set out to be so grand
Sitting on the fifth floor of what used to be the old Laiki Bank headquarters in Nicosia, Chris Pavlou tells me a joke – at least, I hope it’s a joke. The setting is a classroom, where the teacher is asking all the kids to stand up and say what their father does for a living. “Little Annie gets up and says: ‘My dad is a doctor, he treats people and they get better’. Little Susie says ‘My dad is a soldier, he fights for his country’. Then little Johnny gets up and says: ‘My dad is a male stripper. He makes people happy by taking his clothes off, and all the women shout’.”
The teacher looks puzzled, and calls little Johnny to her desk. “But Johnny,” she says, “I know your father. He’s a very respectable man. He works in a bank.”
“Miss,” replies Johnny gravely, “do you really think I could stand up in front of all these kids and admit that my dad is a banker?”
Bankers are unpopular, the villains of the hour. This makes Chris sad because he’s been a banker all his life, working primarily in two banks – Barclays and HSBC – and living in eight countries, from Belgium to Japan to the UK (not to mention Cyprus, where he went through a six-month purgatory as Vice-Chairman of Laiki in its dying days). “Some of the people who were bankers damaged the job I love,” he tells me, his jowly face very serious. Chris is an affable chap, by and large; when it comes to greedy bankers, however, “I want to put them inside and throw away the key”.
He has no doubt where the blame lies: with “the famous bonuses”, the bonus system which began in America and spread to the rest of the banking world. “I’ve been against it all my life,” he affirms, “and everywhere I worked I refused to be on a bonus. I’ve been in this industry 49 years, and I never got a penny in bonus from anybody”. I don’t doubt him – but he spots my flicker of surprise, and becomes more insistent: “It’s very difficult to believe,” he acknowledges, “but the two banks where I worked, Barclays and HSBC, they are there. You can confirm it.”
The problem with bonuses is that they encourage risk-taking, and – more importantly – upset the balance that needs to exist between bankers, shareholders and customers. (He’s not against bonuses for traders, just for managers and Heads of Treasury.) The banker has to act as a middleman, looking after the interests of both sides; his own interests are irrelevant, or at least subsidiary. “The way I was trained was ‘Be careful. Always stay within the guidelines’,” says Chris. When a banker knows that profits will entail a big fat bonus for himself, no questions asked, however – it was always ‘no questions asked’ in the good (i.e. bad) old days – the temptation to stray beyond the guidelines is irresistible. “And eventually that was the reason the markets got destroyed in 2007. Because they got too greedy – and the greedy become the needy.”
We need to get back to basics, he insists. “You’re there to have a good life – not to have a luxury life. We need to get back to that model. Yes, we all have good houses, we have good cars – but I know people who retired in their 40s! With their own aeroplanes, with their own horses! OK? And they go to the golf course at eight in the morning, they finish at 11, they go to the clubhouse, they drink five or six pints of beer, they go and sleep for the afternoon, then they go to a pub for dinner at seven o’clock at night. And I know a lot of people like that”. Their money came from bonuses, which in turn came from playing the market in high-risk, often irresponsible ways. “They retired at 42, at 45. I’ll be 70 in a week’s time, and I’m working longer hours than I ever worked in my life.”
Most of those hours are spent in this fifth-floor office, where Chris is the special administrator of what used to be Laiki Bank; his job is to sell off as many assets as possible and collect as much money as possible, for disbursement to those who lost their shirts when the bank went under during the events of 2013. “I hope we get some decent results by the end of the year,” he says cagily – but it’s obviously a tough job, overseeing deals and mini-crises (“Everything is urgent”) and fielding emails seven days a week. He didn’t ask for the job, the Central Bank called him in – but he’s happy to do it, if only as a kind of redemption for what happened two years ago, the still-fresh wound of returning to the land of his birth, after decades as a top banker, and being unable to rescue it.
He’d been here before, after the bursting of the stock-market bubble, when he joined the Board of Laiki and helped it deal with the fallout – but his year as Vice-Chairman was something else again, like being plunked down on the deck of the ‘Titanic’ with nothing to do but await the collision. “That year was the worst time of my life,” he says now. “I was smoking five packets of cigarettes a day … because I felt so bad that I couldn’t help, I couldn’t do anything about it. People didn’t know me maybe, I don’t know – I don’t blame anybody, it was just the system – [but] I didn’t offer as much as I could. I tried my best.” Chris shakes his head: “That year left a very bad taste in my mouth”.
So why did he accept that poisoned chalice? “I didn’t have a choice,” he replies. Laiki had been buying Greek government bonds since 2009, using them as collateral to borrow from the European Central Bank; its balance sheet showed – and regulators should’ve spotted – that the bank’s Greek-bond holdings had ballooned to more than its capital (good banking practice, he says, is not to lend to anyone more than 10-15 per cent of one’s capital). Everyone knew this, “it was there, in the balance sheet!”. Chris himself must’ve known it, or at least heard about it – yet, in December 2011, he was having lunch with some friends in London when he got a call from the then-Chairman of Laiki, begging him to come back as soon as possible, “we need you to help us”. This was on Friday; he took the 10pm flight, landed in Larnaca at four in the morning, and was in the office – this same building where we’re sitting now – at 8am on Saturday.
The first thing he did was to ask for a balance sheet; “I found one eventually,” he recalls, “and it was horrifying”. It was clear the situation was terrible. “We should’ve taken measures in the banking sector at the time,” he admits, “but we didn’t”. The bank was caught in a bind: what it should’ve done was call in all the loans it was owed – but then the economy would collapse overnight, so instead the situation was left to fester. And there was something else, too: “It was a belief among some people – and I’m not going to name names, obviously – that ‘Let’s do nothing, because these banks are systemic and the EU will come and take care of it, and get us out of trouble’.”
Chris shakes his head: “I came from a different culture, and I kept reminding people that the Germans don’t bluff”. He tells me a story (he’s full of stories, after 49 years) about a forex traders’ conference in Sydney in 1991, just before Britain was forced out of the ERM – the precursor to the Eurozone – because Germany refused to drop its interest rates by 0.25 per cent. ‘Why don’t you help?’ Chris asked the Deputy Governor of the Bundesbank at the conference, and received this response: “We do what is good for Germany. If they want to be as successful as we are, they should do the things we do”.
The Germans (i.e. the Eurogroup) didn’t bluff in our case, either – and of course Cyprus didn’t help with its bolshie attitude: “They wanted to make a point. Because, you see, we refused to accept the fact that it was our fault”. Had we forgotten that our household debt was twice the EU average? Had we forgotten that our banks had delusions of grandeur? Look at this office, he says, gesturing at his fifth-floor abode (it’s not even that big, certainly much smaller than the Chairman’s palatial former office on the seventh floor); the Chairman of HSBC has an office that’s one third of its size. “People here [at Laiki] were told ‘We want to be the biggest bank in south-east Europe’,” he recalls, then pauses: “Why?”. He pauses again, shaking his head in wonderment: “Why?…”
Can we really trust Chris Pavlou? (He is a banker, after all.) Anyone can be wise after the event. Anyone can make pious comments. Is it really true, as he says, that he stood apart from the general venality and recklessness, and tried to stop the rot? (At one point he offered his resignation but the Central Bank refused to accept it, saying it would do more harm than good.) One never knows, of course – but I do note some circumstantial evidence, hinting at the kind of man he really is.
For one thing, he wanted to be a priest. Born poor, to a father who worked on the railways and died when Chris was eight, the young boy grew up with dreams of going into the Church (his godfather was a man of the cloth) – at least till the Church rejected him, at 18, after which he moved to London, studied Finance, and joined Barclays at 21. For another thing, he’s a lifelong Crystal Palace fan – having followed them “from the First Division to the Third Division and back again, with more heartbreaks than trophies” – because Palace were his local team as a student, and he’s stayed loyal. And, for another thing, I note his warm, jocular manner as he walks around the fifth floor, pre-interview, asking a secretary to make him a Cyprus coffee and “a bi-i-i-ig glass of water”. One colleague says he has to leave soon, to pick up his son from the airport; “Where’s he coming from?” calls out Chris amiably, as he shows me into his office.
It adds up to a picture of an easy, approachable man – a man who doesn’t like to be “grand”, as he scathingly describes Laiki’s pretensions – a man who prizes loyalty, admires moral values and strong institutions like the Church (admittedly, being a priest doesn’t always translate into moral probity), a man who probably did feel revulsion at greedy bankers and reckless Cypriot regulators. He looks crestfallen when he mentions that “my marriage unfortunately finished 25 years ago”, as if that failure still rankled, and looks sincere when he says that “I’d prefer to be called a good team man than a leader”. He hates the bad language at local football games, and also hates seeing food wasted; his face darkens as he talks of seeing tables heaped with leftovers at a popular taverna.
What does he do for fun? “I like to go with my friends to the pub, I thoroughly enjoy it,” he replies, brightening. Four or five colleagues, after work – 95 per cent of his friends are colleagues, he tells me – sitting in the pub with a few pints; “We start with the day’s work, then we talk about football, and then we talk about everything”. His other great joy is cooking for the family (actually his partner’s family) on a Saturday morning, having first gone round to the butcher, the baker and the fishmonger – “everybody knows me, I know them all!” – and had a conversation about the freshest bread and the best cut of meat. He loves bonding, he loves friendship, he loves community. He still has dinner, three or four times a year in London, with the first colleagues he ever had, back when he first joined Barclays in 1966.
‘How important is money?’ I ask this man, who’s been around money – often vast sums of money – all his life. Not as important as you’d think, he replies; “What is important really is to be happy with your…” he fumbles for the word, “your woman, and to have loads of friends”. 49 years of the good – but not luxury – life, the only blight being the lingering bitterness he feels over the haircut, the death of Laiki, “our inability to come up with alternatives” and his own painful helplessness in the face of a rotten system. “I hope now I will do a better job,” he says. “I hope I can offer more now”. Then we shake hands, and I take the vertiginous ride in the very expensive glass elevator to the ground floor.