Finance minister Harris Georgiades has not exactly improved his standing with his handling of the Cyprus Cooperative Bank, which was under his authority for the whole of its existence as a state-owned entity. If anything, his reputation as a safe pair of hands for the economy has been dealt a blow by the goings-on, under his watch, at the CCB, which are being revealed at the proceedings of the investigative committee looking into the collapse of the bank.
Speaking on CyBC radio on Tuesday morning, Georgiades argued that the absence of corporate governance was “the reason the co-op was led to a financial impasse and required a state bailout.” He also noted that merging close to 100 different co-op branches into the CCB was bound to be problematic. “How could an organisation have the proper structures when it was not an organisation but instead a network of almost 100 local branches,” he asked.
These were perfectly legitimate points and perhaps the CCB was indeed doomed but given what has been heard at the investigative committee so far, the government does not appear to have done everything in its power to save it. The appointment of Nicholas Hadjiyiannis first as chairman and then as CEO of the CCB smacked of blatant favouritism. He was given the job of saving the bank not because he was an experienced banker with a proven track record but because he was a close friend of the minister.
Hadjiyiannis’ experience of banking was limited to advising wealthy bank customers on how to invest their funds. And because of his inexperience and limited knowledge of banking another banker was hired to help him out. This was a clear admission that he was unsuitable for an extremely difficult and demanding job, which would have been a challenge even for a hard-nosed banker with years of experience and a proven track record.
Under the circumstances, Georgiades’ decision to appoint Hadjiyiannis and keep him in his post long after it was clear that he was not up to the job was indefensible. Was a man that had never held a senior management position in a bank going to turn around the struggling CCB and introduce the proper structures that the minister said were absent? According to the testimonies given at the investigation by members of the board he even failed to improve corporate governance, ignoring procedures and concentrating all power in his hands, something he achieved with the backing of the political appointees on the board. At the investigation one former member of the board mentioned that minutes of board meetings were altered.
Whatever Georgiades says about proper structures and corporate governance are excuses to play down his responsibility. The reality is that he appointed a novice banker to turn around a bank in deep trouble, which was saved by an injection of €1.7 billion of the taxpayer’s money because he was his friend. It was not a responsible way to protect the taxpayer’s money and the minister should know this.