WHAT IS happening at the Banks of Cyprus? Finance minister, Haris Georgiades’ publicly-voiced displeasure, on Thursday, over the slow pace of the restructuring process put additional pressure on the bank and the Central Bank Governor, who does not seem to show a great sense of energy.
While Governor Panicos Demetriades had given assurances that the process would be completed by early May, according to the minister, he subsequently suggested it would take another three to four months. There are admittedly legal issues slowing down the process, with Bank of Cyprus facing a host of legal suits against the deposits’ bail-in that it would have to deal with. The capital controls, which could remain in place for some time, further complicate matters and affect the restructuring process.
But even acknowledging these problems, the process of restructuring has been very slow. It took weeks for the Central Bank to choose the interim board of directors and instead of appointing six members to make decision-making faster, it appointed 14. Meanwhile, the bank has been without a CEO since Yiannis Kypris was forced to resign by Demetriades. The post will be advertised next week, which means it could take another month or two before the position is filled; and then the new CEO, if an outsider, would need time to familiarise with the job.
One of the biggest problems facing the bank is that it has no leadership. It is currently being run by an administrator who is in charge of the restructuring and an interim board that would step down when the process is completed. Add to this the addition of more than 2,000 Laiki Bank employees to its workforce, an ill-conceived decision that would cause much tension among staff when redundancies are made, and it becomes apparent that the bank’s troubles are far from over.
The uncertainty and instability caused by the lack of leadership may suit the Central Bank Governor, because it allows him to keep the Bank of Cyprus under his control, but it does not exactly pave the way for the bank’s return to normalcy, which is what the government wants. It could be that Georgiades’ public dig at Demetriades is dictated by the minister’s desire to wrest control of the bank from him, but it is questionable whether the government would do a much better job of running it.
The truth is, neither side inspires much confidence and, if the bank survives, as we all hope it does, it will be in spite of the government and the Central Bank.