THE days when the Cypriot banks could employ more staff than they needed and pay them wages that were envy of the rest of the workforce are long gone. Still having to deal with high percentages of NPLs in their loan portfolios and interest rates at historic lows, the only way to respectable profits and sound prospects is cost-cutting. The IMF warned that the banks needed to cut costs and the obvious way of achieving this was to reduce the number of employees.
There has been a drive to force customers to engage in e-banking, by imposing charges on over the counter banking transactions, which would enable them to cut jobs and close down branches, of which there are too many, but it has been a slow process. Cypriots may be avid users of Facebook, but computer use for commerce is still at a very low level, according to all reports, which is why efforts to encourage e-banking have not had the desired results.
But this will not prevent banks from making job cuts. The new CEO of the Bank of Cyprus, Panicos Nicolaou has announced a voluntary retirement scheme as part of its cost-cutting drive. It currently employs 4,155 people, a number that is incompatible with the bank’s new business model, said Nicolaou, explaining that the retirement scheme would rationalise its cost base.
The plan for layoffs was being discussed from the time of his predecessor, John Hourican who had also wanted to bring down very high pay-scales of the banking industry but was prevented from pursuing this by the board, which did not want a confrontation with the ultra-militant bank employees’ union Etyk. The confrontation over pay that the bank’s board dreads will take place at some point in the future because the squeeze on profits will persist even after the redundancies.
In fact, Hellenic Bank has already opted for some form of confrontation. Etyk has called a 24-hour ‘warning strike’ at the bank next Friday for its alleged refusal to pay staff automatic wage increases and the cost of living allowance; it has also claimed the bank was treating the employees that joined from the Co-op Bank unfairly. It is not known how Hellenic will deal with the strike threat, but it is clear is that its board and management recognise that the continuous growth of the payroll through ‘automatic’ increases has to be dealt with before it is too late.
The Bank of Cyprus will also accept, eventually, that redundancies, which are extremely costly given the over-generous compensation packages offered, will not do away with the problem of high labour costs. There will have to be a showdown with Etyk sooner or later.