UNDER threat of litigation, the Bank of Cyprus (BoC) has awarded former CEO Andreas Eliades compensation to the tune of some €2 million.
The move comes after a majority decision of the bank board last Friday. No money has been disbursed yet; given that the bank has requested state assistance, the final say rests with regulatory authority, the Central Bank.
On resigning his post in July last year, Eliades demanded €3.5m in total. The €2m figure awarded last week is seen as a compromise.
It’s understood that Eliades had taken out a €1.9m loan from the bank; so his compensation covers the amount he owed plus a little extra.
Sources said the bank’s leadership were in two minds, but buckled under pressure from the provident fund committee, which in turn had been threatened with lawsuits by Eliades.
Some in the bank thought Eliades’ demands from the provident fund to be inflated.
Provident fund payouts are based on the salary. In the past, Eliades had received a bonus – linked to bank profits – that far exceeded the limit set out in his contract. To overcome this restriction in the contract, a formula was devised so that part of the sum would be logged as salary and the rest as a bonus.
But the one-off arrangement had the side-effect of raising Eliades’ salary on paper, and thus also increasing his retirement benefits.
On leaving, Eliades asked for the full provident fund he felt he was entitled to, as per the previous arrangement. Initially the bank was averse, and at that point Eliades sued each member of the provident fund committee individually.
Legal precedent in Cyprus has established that provident benefits must be paid irrespective of any other financial dispute between an employer and an employee.
Apparently faced with the prospect of being dragged to court, the bank’s provident fund committee urged the board not to contest Eliades on this point.
In Eliades’ case, his bonuses have had an impact on the compensation figure, even if in a roundabout way. But some in the bank dispute the very bonuses paid out over the years to the former strongman.
It’s understood that during his stint as CEO, Eliades received around €1.8m in bonuses.
Sources close to the BoC said at least some of these bonuses were linked to posted bank profits which, in hindsight, were “artificial given what we now know about the last couple of years.”
It would be best for the BoC to have withheld compensation until ongoing probes into possible bank malpractice are completed, the sources said.
They were referring, among others, to an independent investigation conducted by Alvarez & Marsal, a US-based firm hired last August to identify how the island’s largest banks ended up needing billions of euros in bailout money.
The sources even suggested that, should these investigations find that certain people were responsible - through actions or omissions – for the state of BoC today, the bank could ask these people to return their bonuses.