The ‘wind of change’ that swept through the Bank of Cyprus Pcl board leading to the resignation of three directors and the Chairman relinquishing his position is expected to sweep through other banks as well.
While the board changes were forced on the BOC by Central Bank Governor Christodoulos Christodoulou, intent on forcing bank boards to abide by the corporate governance code and uphold high ethics standards, the changes at other banks were expected to be as a result of changes in their shareholding structure.
Other than Hellenic Bank, which underwent a thorough shakeup in mid-2005 as the bank was “cleansed” at the top with the arrival of a new Chairman, Andreas Panayiotou (March 2005) and CEO Makis Keravnos (Sep. 2005) who subsequently joined the board in July 2006, the other banks are likely to see broad-based changes.
In the case of Laiki Bank, which experienced a thorough shakeup following the departure of Kikis Lazarides in July and the election of new Chairman Neoclis Lisandrou and new CEO Christos Stylianides after Marfin Financial Group put its stamp of authority on the bank, the whole board is expected to undergo another shake-up, this time to accommodate the anticipated change in its shareholding structure once the Laiki-Marfin-Egnatia merger is completed.
Universal Bank is also likely to see a number of board changes if the bid interest expressed by a German led shipping group based in Limassol is allowed to proceed. More changes are also due at Emporiki Bank (Cyprus) Ltd., after the French banking giant Credit Agricole wrested control of Emporiki Bank of Greece, which in turn holds a controlling 60% stake in Emporiki Cyprus.
Of the other banks, Alpha Bank, Arab Bank and the National Bank of Greece (Cyprus) Ltd., will not be affected by recent changes.
Sweeping changes
By far the most sweeping changes at Hellenic Bank, Bank of Cyprus and partially at other banks have been forced upon because of the cleanup orchestrated by the Central Bank Governor.
At Bank of Cyprus, the sweeping changes were forced through after several letters were sent by Christodoulou to the then-Chairman of the bank, Vassilis Rologis, in which the Governor pointed to countless irregularities at board level that went against the interests of shareholders and the bank’s depositors.
The letters were followed by the resignations of three board members — Polys Polyviou, Demetris Pierides and G. David.
The departure of at least two Rologis allies may have weakened the position of the former Chairman, but the turn came when another three board members, who had previously voted for him, defected and joined the reformists who wanted Rologis to go. Reliable sources confirm that Rologis, sensing that he would be forced out, decided to save face and tender in his resignation as Chairman, but remain as a member of the board. Rologis said in his resignation letter that he was resigning in order not to become an obstacle in the future growth of the bank.
A week ago and only a month after Rologis’ resignation, the Central Bank gave BOC the green light to expand into Romania.
Corporate Governance
Banks will in any event proceed with the election of new board members in order to comply with the Corporate Governance Code according to which board members may only serve a maximum of nine years. At least eight members of the BOC board have served more than the allowed period.
Another clause according to which board members who are classified as “independent” should not owe the bank money, for private or their business, otherwise be liable to pressure from bank staff and could thus lose their independence, may force sweeping changes at all banks.
The Code also wants independent members to refrain from engaging in business with the companies on whose board they sit, lest they lose their independence.
Watch Christodoulou
It’s not just a coincidence that during Christodoulou’s tenure, all the major banks have seen their presidents and CEOs resign and vacate their chairs and most board members have either resigned, or about to change.
The “People’s Man”, as many refer to Christodoulou, is showing no sign of letting up even though he is nearing the end of his term in office, due May 2007. In fact people close to him say that he has turned down a lucrative job offer from abroad, wishing instead to press ahead with the changes now underway.
