Cyprus Mail

You borrow money, you pay it back

Bank of Cyprus Chief Executive John Hourican

By Jean Christou

Borrowers in Cyprus need to change their habits and learn that when you borrow money you have to pay it back, Bank of Cyprus (BoC) CEO John Hourican said on Wednesday.

Answering questions during a shareholders meeting to announce a net profit of €60mln in the first half of the year and a net profit of €29m in the second quarter, Hourican said: “We need to start driving up the behaviour of our borrowers so we can writedown the statistics of our non-performing loans. The biggest challenge for financial recovery and strength of the bank was non-performing loans and the behaviour of customers,” Hourican said.

“It is the case that we do all we can to help vulnerable people,” he added. “But it is not the case that we are offering blanket solutions to anyone who is a borrower to come and have a discount on a loan which depositors have to pay for. That would be immoral, unethical, terrible business practice.”

Under the terms of the island’s bailout, depositors at BoC saw almost half of their deposits in excess of €100,000 turned into equity.

Fending off criticism from borrowers associations that banks were slow to help people restructure their loans, Hourican said that in the two years since the financial crisis began, the bank had restructured more than 15 per cent of people’s loans “and given them very serious forbearance”.

“It is very easy for someone who is not… cooperating to complain to an association and get their voice heard because it appears to be what people want to report on, but this bank will not recover and this industry will not recover, and this country will not recover unless we get back into the habit of meeting our obligations when we borrow money,” he said.

He said when someone borrows €100 from the bank, 85 per cent of that is taken from depositors and not paying back money to a bank is not paying back depositors.

“So I have very little general patience for the remarks of associations in general and I have great sympathy for individuals in distress who come and talk to us because we absolutely want to help, but what we cannot have is these general remarks about bad banks doing bad things to good people because that is not the case.”

He said BoC was doing everything it could to help vulnerable people and vulnerable businesses get back on their feet. “The inconvenience of the truth sometimes gets in the way when someone is either not viable or not cooperating or chooses not to be,” said Hourican.

The BoC CEO said he was not afraid to call things as he saw them and the aim was to help the bank get back on its feet so the economy could do the same. Without strong banks there would be no credit to feed wealth creation in a recovering economy.

“We have to stop thinking the bank is the ‘bad beast’ in all this. I am the custodian of depositors’ money and I must safeguard it as best I can, but I also must create a viable bank… and I must also ensure that I give the right help and tools to customers to be able to manage their own financial affairs and I think we are doing a lot.”
Hourican said foreclosures law “which we’ve all been talking about forever” and which was expected to be put in place in August of last year, had only become operable last week. In that sense, he said the tools BoC had in place to make things happen faster had been delayed.

“We have to move this debate on and stop talking about the same things over and over again. We have to start talking about things that matter. What matters is how we create the conditions for a growing economy and not to have the same debate we had in March 2013,” he said.

The offended parties in the whole debate were the depositors because others were not paying their loans, Hourican said, adding that he wanted all of the money back from those borrowers who were non-compliant.

“What you [the questioner] are suggesting is that in the level of our institution we should begin to offer large chunks of our equity to people who are contractually obligated to repay. We should be pushing ahead to moralise the landscape of laws that will create the conditions for people to want to bring their money to invest in Cyprus or to bring their funding and provide for use in Cyprus). If we continue to have a xenophobic discussion about ‘people coming to steal our houses’, it’s utter nonsense. The bank is merely trying to do what’s right and encourages the legislature to do what’s right also, to create the foundations for a prosperous economy,” he said.

Asked about when he might be leaving the bank as previously announced, Hourican said he was flexible on the on the transition while the bank goes through the processes in determining who they may find to replace him. The process was well underway, he said.

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