Another “new era” dawns for Bank of Cyprus

E DII TO RII A L

Financial Mirror (Cyprus) - - FRONT PAGE -

The rate at which Bank of Cyprus is wit­ness­ing suc­ces­sive “new eras”, one would think that we are a for­mer Soviet state that has just come out of a rigid eco­nomic model and is sud­denly em­brac­ing the free mar­ket sys­tem, with suit­ors lined up to buy any­thing they can get their hands on.

The only prob­lem is that the one-time driv­ing force of the Cyprus econ­omy has been down­graded from a For­mula One racer to a hum­ble rick­shaw and all be­cause of poor man­age­ment by the bank it­self, years of su­per­vi­sory ne­glect by the Cen­tral Bank, in­abil­ity of share­hold­ers to stand up and be heard and, ad­mit­tedly, the weak­ness of the me­dia it­self for not be­ing able to dig fur­ther deep into the deal­ing of the banks and its bosses.

Now, nearly three years af­ter the bank’s foun­da­tions started to shake, BOCY seems to have at last com­pleted its cy­cle and is about to em­bark on a truly new era, which, we hope will be an up­ward path and all stake­hold­ers will get to ben­e­fit.

The bank has re­couped some of the money owed by the govern­ment for bur­den­ing it with the trou­bles of the now de­funct Laiki Pop­u­lar. The bill on re­pos­ses­sions will hope­fully get through par­lia­ment in some form or another in order to help banks re­cover as­sets in ex­change for non-per­form­ing loans, es­pe­cially from those who can af­ford to re­pay but refuse to do so.

And this week, it has re­ceived the go-ahead to pump some 1 bln eu­ros in fresh cap­i­tal from for­eign in­sti­tu­tion­als, with the likes of the EBRD and US hedge funds aim­ing to grab a 40% share of the bank, and its man­age­ment.

Just as The Co­op­er­a­tive Bank was res­cued by 1.5 bln eu­ros of tax­pay­ers’ money, while con­ser­va­tive lender Hel­lenic has brought some un­con­ven­tional in­vestors on board at a cost of 100 mln eu­ros, per­haps it was about time we got share­hold­ers with an out­sider’s per­spec­tive who will help re­build Bank of Cyprus to the fi­nan­cial gi­ant it used to be.

Bring­ing in non-na­tive CEOs, as was the case of the last two, has been good for the bank, but with lit­tle ef­fec­tive im­pact from non-sup­port­ive board mem­bers who think that they have the God-given right to med­dle with day-to-day bank­ing and op­er­a­tional de­ci­sions.

With the new in­vestors com­ing on board, it’s high time the bank was con­trolled by peo­ple who know a thing or two about bank­ing, lo­cal or in­ter­na­tional.

CEO John Houri­can has been diplomatic in all his state­ments, un­will­ing to delve into the past and find the causes of the bank’s melt­down, as he rightly says that he is tasked with fix­ing what he has at hand – a wounded bank with poor staff morale and in­flex­i­ble lend­ing mech­a­nism – in order to get the clients (and the econ­omy in gen­eral) up and run­ning again.

Hope­fully, a new, more busi­ness-friendly board and share­hold­ers will push for a quick turn­around and a rapid re­turn on in­vest­ment.

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