The Board of Directors of Bank of Cyprus (BoC) is expected to decide on a meeting on Thursday and Friday the separation of the Bank, to help dealing with the problem of non-performing loans (NPLs), rising dramatically in the Cypriot banking system amid the continued economic recession.
The possible separation would mean the creation of a separate unit, a “development bank”, as the President of the Board Christis Hassapis said, after a meeting of the Board of the Bank with the Cypriot President Nikos Anastasiades. He added that on this issue, the Board of Directors will meet Thursday afternoon and most likely on Friday. Any decisions taken may be announced tomorrow.
However Hassapis clarified that they were not talking for a `bad bank`.
“We are talking about a possible `development bank` not a `bad bank `,” he said, adding that “today we will take some decisions“.
Rebuffing allegations that there is controversy on the subject between the members of the Board, Hassapis said that the entire Board was talking about a “development bank” and they were discussing now about the most appropriate way to create it. For that reason, he said, they have hired HSBC who was expected to brief the Board today.
Hassapis also made it clear there was no political pressure on dealing with the NPLs, or any conflict with the CEO of the Bank John Patrick Hourican, as reported in the media.
Regarding the NPLs, Hassapis said there is a special unit in the Bank, consisting of about 500 people led by Euan Hamilton former deputy chief of the Royal Bank of Scotland. He added that the Bank has called four experts from KPMG London to help in the process of restructuring these loans.
“We are moving ahead, in the right direction, with the proper planning,” he added.
Hassapis also described the meeting with the President as “a very good meeting” saying that BoC, as systemic bank influences and was influenced by the economy.
Answering to questions, CEO of the Bank John Patrick Hourican said that he had not experienced any political pressure on dealing with the NPLs.
“I think is really important that you understand that we are dealing with every borrower in a very specific and deliberate way, to recover the bank`s position and to ensure that we treat them fairly”, Hourican told journalists.
Asked whether his opinion about the issue of the creation of a bad bank prevailed in the Board of the Bank, he said that there is no winning or loosing.
“There`s a consideration in a professional way by the board of the bank of the various options that are available to us and this is a matter of discussion and debate and we have not concluded on what we are need to do but we are looking at all options as you would expect us to do”, he said.
“We have stabilized the asset quality of the bank during the last six months and it is our job to explore all options to try and accelerate the progression of the bank against its recovery plan. We are running ahead of our recovery plan today and it is our job to try and accelerate that journey to ensure that we contribute to the recovery of Cyprus”, he added.
Government: BoC to decide on the issue of separation
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The Bank of Cyprus is responsible to take the decisions and the Government shall be informed , said Government Spokesman Nikos Christodoulides.
“What we have to say and must be very clear to everyone is that we should not talk about a good and a bad bank under any circumstances,” he said.
He added that the issue was a responsibility of the BoC and that the Government and the Minister of Finance would follow the subject, because the common goal is the recovery of the bank and the banking system.
Cyprus on March 2013 signed with the EU and the IMF a €10 billion financial assistance package, which featured a haircut on banking deposits over €100,000 to recapitalise BoC, which absorbed Laiki Bank that will be wound down.
