AFTER weeks of speculation and public bickering the Bank of Cyprus’ new shareholders elected a board of directors, at an ill-tempered AGM. The 16 new members included six Russians who lost big amounts of money in the forced conversion of deposits to equity.
This was an ironic twist, considering one of the objectives of the bail-in was to punish Russian oligarchs who, according to German politicians and newspapers were allegedly using the Cypriot banks for money laundering. Now the people that the Eurogroup wanted to punish will be in control of Cyprus’ biggest bank, even though they have paid a premium price for this control.
This is not necessarily a bad thing for the bank or the country. On the contrary, having individuals determined to recover the funds they lost in the bail-in, by ensuring a speedy return of the bank to profitability, could be a blessing. Foreign directors are more likely to back the difficult and drastic decisions that need to be taken, because they will have no interest in keeping on the good side of the union, the politicians or the customers with NPLs happy.
Cypriot directors, on the other hand, are more likely to adopt the softly-softly approach to resolving the big problems faced by the bank, as had been the case with the ineffectual interim board. What the BoC needs more thank anything is strong leadership that would act decisively in implementing the strategic plan drafted by the foreign consultants. This would involve taking unpopular decisions such as selling off assets used as collateral by customers with NPLs, clashing with the bank employees union ETYK over pay and work conditions and selling bank subsidiaries, while ignoring political pressure.
It would be an important step towards regaining some public confidence and trust which are currently non-existent. Improving the public perception of the bank must be the priority, but this cannot be achieved solely through a clever advertising campaign. There must be concrete evidence that the board is ruthlessly pursuing a plan of action that would ensure a return to normalcy in one, two or three years.
The sooner the bank is on the road to recovery the better for the economy. But very tough and unpopular decisions that would be opposed by different interest groups would have to be taken before this is possible. We hope the new board will successfully meet the big challenges it faces, because the Cyprus economy is dependent on it.
