THE HEAD of a central bank does not have an easy position, nor does a minister of finance nor does a president, but however different their roles and responsibilities might be they need to work together in the interests of the country they each serve. Governor Athanasios Orphanides appears not to have a record of working with others. Instead, he appears to have a record of making statements publicly which conflict with those of government and ministers of finance. Whilst it is healthy to have other views, it is not always healthy to express those views in public. Perhaps had Orphanides expressed his views in private instead of via an egotistical trail, and at the gates of the presidential palace, he might well have persuaded the powers that be (i.e. the then minister of finance and the president) into accepting his viewpoint and then, together, they could have moved forward in a collective spirit and in the interests of Cyprus.
Instead, Orphanides appears to have alienated two ministers of finance and one president. Is that what is expected of a central bank governor?
It is also surprising that despite the mother and father of Orphanides reportedly being AKEL followers, and despite the fact that Orphanides was born in the Czech Republic (to a mother who was apparently a leftist and, seemingly, exiled in the Czech Republic), the president now is clearly uncertain whether Orphanides’ action in allowing the Cypriot banks to irresponsibly allocate a large portion of their deposits to a Greek ailing economy, his reported rejection of the authority of the council of the central bank, and his altogether totally autocratic behaviour has been or is in the interests of Cyprus.
It seems that, Orphanides is acting in his own interests. The central bank’s website, for instance, appears to be an indication of what Orphanides thinks of himself rather than what he thinks of Cyprus. If you look at the many articles which are listed on the website and attributed to Orphanides, few are connected to banking, many are co-authored and the rest are mainly connected to theories.
In the case of one of the contenders for the post of governor, Panicos Demetriades, it is interesting that, according to international research, many of his numerous articles are devoted to banking. Perhaps had Demetriades been originally appointed instead of Orphanides one might have a much better and stronger banking sector in Cyprus.
What does Orphanides know about banking supervision, about country limits, about sector limits, about Basle I, II and III and about banking normatives, ratios or Basle committees in general? Being a member of the governing council of the European Central Bank does not automatically qualify him as an expert in the banking sector or banking supervision, but it may greatly assist in securing support from the European Central Bank to help in restoring the Cyprus banking sector to its former strengths.
Orphanides has had five years to prove himself and to prove the effectiveness of the central bank of Cyprus and the effectiveness of banking supervision. He has failed on all three counts. It needs someone else to clear up his mess.
And that someone could be Demetriades who is an acknowledged expert in the banking sector. Just look at his background. According to the economic research division of the federal reserve bank of St Louis, he is listed in the top 10 per cent in the world of authors in the field of banking. Orphanides is not even listed in that elite group of experts.
Demetriades has advised the World Bank, the OECD, the African Development Bank and the Economic and Social Research Council in the United Kingdom.
He has worked for five years in the central bank of Cyprus.
He is the only Cypriot economist who is the member of the Academy of Social Sciences in the United Kingdom and has considerable managerial experience leading the University of Leicester’s department of economics.
He has advised the co-operative central bank of Cyprus and has served on the governing board of the Cyprus University of Technology.
Athanasios Orphanides appears to be mainly a theorist with some practical ideas, Panicos Demetriades is a practical man with practical ideas and with a practical mind – but he also knows theories.
Cypriot banks need changing, the central bank needs changing and Cyprus is going through change. Demetriades is the man for change.
Orphanides has proved that he is not a person to achieve constructive change; he is one to debate change. Demetriades is clearly a man to co-operate in ways to optimise change and is willing to work together with others who have the same constructive objectives, i.e. the health and prosperity of the Cyprus banking system.
If a person can’t get it right (or left) after five years then there is a need to change. Will Demetriades do any worse? I think not: his background is sound, his thinking is respected, his actions are co-operative, and he has spent five years in the central bank of Cyprus during a time when it was respected institution.
I am confident that given the right support Panicos Demetriades will serve the central bank and his country of birth to the best of his many abilities.
Andreas Stylianou is a retired banker
