The power struggle at the Bank of Cyprus is not doing anyone any good and both the chairman and CEO ought to rethink their whims and get (back) down to work.
Soon after John Hourican was head-hunted and subsequently appointed, the new chief executive took over from where his interim predecessor had left off – picking up the pieces of a largely fragmented bank that had been suffering from decades of managerial abuse. This abuse included doing favours to major corporates who have since reneged on their loan repayments and put the bank in the troubled spot it is today. Unfortunately, it is these majors and their politico friends who are putting pressure on chairman Christis Hassapis and other board members, as well as senior managers, to get Hourican to back down from aggressive recovery efforts, allegedly because they are the bank’s biggest customers and they deserve better treatment.
But we live in a society where almost everything goes unpunished and those who have been unjustly accused will never have their day in court. The only form of by an outsider outsider, ie. the uninvolved, unrelated manager with no ties of any kind to anyone, hence no obligations.
It is because of the refusal of the majors to pay their delayed debts that the bank is having trouble with recovery efforts, ultimately resulting in a fine line between fair liquidity and risky liquidity. Whatever the ratio, the bank is strapped for cash and has no fresh money to lend to consumers and new borrowers in order to get the economy started again. Businesses, and in particular SMEs, are struggling and many have resorted to liquidation, making it worse for the bank that holds all this debt.
Hourican and his team so far seem to have done well with the gradual sell-off of unwanted assets, first and foremost being the timely exit from the Ukraine bank, albeit at a lower price. Next, it will have to get rid of its stake in CMP Laiki Insurance, which, ironically, even the French 50:50 partner does not want. Perhaps it is time to revive talks with old investors who had shown an interest in Eurolife and General Insurance Co. to buy CMP Laiki.
On the other hand, despite the forced-sale of the Greek banking operations, the life insurance division in Greece is a steady revenue earner, not worth selling, as the bank’s growth will undoubtedly come from overseas activities this year. This also suggests that the sale of Uniastrum in Russia should only come after very hard thought, as, if properly managed, that network too could prove a steady revenue earner for the bank.
But these are taking too long and everyone is suffering, at least everyone outside the Bank of Cyprus (and government) who do not receive their pay cheques regularly at the end of the month. Perhaps it’s time for some rapid action to get the bank up and running again, otherwise it will remain in free-wheel for a long time, with no prospects of a quick recovery.
If Hassapis and Hourican cannot find the courage to work together, then they should both go home.
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