ECONOMY: Changes in how staff are paid by Cyprus banks “inevitable”””

A change in pay policy for local bank staff is unavoidable and management needs to engage with the unions on this issue, new Bank of Cyprus CEO Panicos Nicolaou argues.

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“The banks will need to move fast in engaging with the unions to promote a fair remuneration system based on productivity and job description,” Nicolaou told the Limassol Economic Forum.

He said this may not happen this year or the next “but it will come soon as this is inevitable, and it will come.”

Staff at Hellenic Bank have already gone on strike over pay and conditions as their employers wants to change how they are rewarded.

Nicolaou highlighted the main challenges facing banks in the euro area, namely, low interest margins, cost-to-income-ratio, legacy issues, such as non-performing loans, regulation and the digital disruption.

“Having lower income, banks need to improve cost efficiency,” Nicolaou said.

He said solutions could come from more traditional cost-saving actions such branch network downsizing as well as adopting cost-efficient technology.

He said banks in Cyprus and Southern Europe are facing headwinds from NPLs which absorb a lot of operation capacity, tie-up capital and involve high administration costs, while regulators press for higher capital requirements and for solutions in legacy problems “within accelerated timeframes.”

“There is no grace period for solving our legacy problems.”