THE viability of the Bank of Cyprus (BoC), the island’s biggest, is a national priority, new ruling DISY leader Averof Neophytou said yesterday, as he called for the immediate appointment of a board to oversee the lender’s restructuring following a Eurogroup decision to impose hefty losses on its uninsured depositors.
The Cypriot economy’s salvation goes through the rescue of BoC, Neophytou said.
“Everyone must understand this. The new BoC, after the merger with Laiki, has a local share that exceeds 60 per cent,” Neophytou said.
The majority of businesses were BoC customers, he said, adding that the absence of a leadership at the lender had cost the economy a lot.
The lender’s board and CEO had resigned and an administrator was appointed after a Eurogroup decision to impose a haircut on deposits over €100,000 to pay for the BoC’s recapitalisation.
The decision also called for winding down Laiki, Cyprus’ second biggest, with certain assets to be taken over by BoC.
The Central Bank had said that the administrator would only be in place for several days but it has now been several weeks with the rate of the haircut has not been decided yet.
Uninsured deposits in BoC – over €100,000 – currently face a €37.5 per cent cut although an additional 22.5 per cent, which have been frozen, could also suffer the same fate.
Of the remainder, the CBC has only released 10 per cent.
The government had decided to exempt various entities from the scheme, such as municipalities, charities, schools, and insurance companies, but Finance Minister Harris Georgiades told parliament recently that the list would be reviewed.
Various groups have also demanded their provident funds be exempted.
Officials have warned that more exemptions would mean a deeper haircut on deposits.
If the state wanted to exempt certain entities “we have the humble opinion that it should not do so at the expense of depositors at Laiki and BoC,” Neophytou said. “It is unfair for depositors in the two banks to be saddled with additional burdens. For every €100 million exempted, you add (a loss of) 1.0 per cent on BoC depositors.”
Neophytou said he understood the systemic nature of insurance companies and the workers’ concerns over their provident funds, but “I think it is socially unjust to put our hand deeper in the pocket of depositors.”
Cyprus introduced curbs on money movements when banks reopened on March 28 after a two-week shutdown while the government negotiated a €10 billion bailout from the International Monetary Fund and the European Union.
Its capital controls are a first for the eurozone, introduced in an effort to prevent a cash drain.
Neophytou said restrictions must be lifted as soon as possible because the market was near paralysis.
He said BoC could be protected while controls were lifted in the rest of the sector.
The new DISY leader cautioned other banks to refrain from taking advantage of the BoC’s predicament.
“They should forget that it is the time for them to increase their (market) share,” Neophytou said. “They too must respect and support the BoC.”
