Another “new era” dawns for Bank of Cyprus

E DII TO RII A L

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.