About 550 staff will get a tax-free bonus of €180,000 each to leave the Bank of Cyprus as part of a downsizing plan that includes shuttering 20 branches and helping return the bank to dividend-paying profitability.
The bank said it had completed the voluntary staff exit plan, reducing its workforce from 3,395 to about 2,851 at a total cost of €99 mln.
The bank will save €37 mln or 19% of staff costs, reducing its workforce by 1,300 since June 2019.
From 2013, when the bank absorbed the former Laiki Popular Bank network and was restructured to the detriment of its depositors, up to 2019, Bank of Cyprus held four voluntary retirement plans for maximum compensation up to €200,000.
In October 2019, 470 employees opted to leave the bank at the cost of €79 mln.
Apart from the consolidation, the Bank of Cyprus has closed 60 branches.
“The successful completion of this latest voluntary exit plan means we are achieving our objective of right-sizing the bank ahead of schedule, which is key for the improvement of our operating efficiency, sustainability of our business model and the achievement of our medium-term targets,” said CEO Panicos Nicolaou.
Highest labour cost
The latest round of early retirements follows an opinion issued by the European Banking Authority (EBA) that said Cypriot banks led EU member states in labour costs.
According to EBA data, Cypriot banks’ staff cost to equity ratio is 12% — the highest in the 27-member bloc.
Cyprus is followed by Romania (11.2%), France (11.1%), Italy (10.8%), Spain (10.7%), Hungary (10.6%), the Netherlands (10.4%) and Germany (10.1%).
The banking sector has repeatedly said it is under pressure.
As a result, it promotes business plans to cut operating costs, reduce staff and branches, and upload the bulk of its business onto the digital highway.
Bank of Cyprus had warned that if enough employees did not accept the plan, it would opt to make them redundant.
The bank told employees this would be the last voluntary exit scheme to be imposed, implying that any future layoffs would be carried out with redundancies.
Rivals Hellenic Bank’s recent attempt to make 350 employees redundant without compensation led to a pushback from its staff, which voted in favour of industrial action in May.