President Nikos Christodoulides congratulates new Central Bank of Cyprus Governor Christodoulos Patsalides.

Cyprus appoints new ECB member, just in time

3 mins read

Cyprus appointed a new Central Bank Governor on Tuesday, just in time for Christodoulos Patsalides to attend the ECB monetary policy meeting in Frankfurt on Thursday.

The appointment was announced on Monday and Patsalides, a former deputy CEO of the Bank of Cyprus was sworn in on Tuesday, a day before the deadline expired for Nicosia to inform the ECB of its new council member, replacing Constandinos Herodotou whose term ends on Wednesday

The president’s special advisor on economic affairs ever since Nikos Christodoulides was elected in March 2023, Patsalides was long groomed for CBC Governor, while he was runner-up for Finance Minister when the new administration took office.

When Christodoulides appointed a new Financial Ombudsman last month, this put an end to rumours that Patsalides would take up that post, while Herodotou reportedly was unaware if he would be reappointed Governor of the Central Bank of Cyprus for a second term.

Patsalides, 62, returns to the central bank after 35 years, where he started work at the departments of external debt and foreign exchange reserves. He joined the Bank of Cyprus in 1996, where he remained for 25 years, rising to Chief Operating Officer and Deputy CEO.

He left the bank in October 2020 and became a consultant, providing advisory services in banking, finance, insurance and fintech.

He is the son of Andreas Patsalides, a former Finance Minister under President Makarios from 1968 to 1979 under President Kyprianou, who later joined the Bank of Cyprus, where he remained in the bank’s leadership until 1998.

During the swearing-in ceremony at the Presidential Palace on Tuesday, Nikos Christodoulides told the new CBC Governor to continue with the central bank’s restructuring.

He added that his government will maintain its three economic pillars and sustainable development through, among others, surplus budgets, financial stability and reforms.

“At the same time, Cyprus presents, unfortunately, one of the biggest disparities between lending and deposit rates, a fact which creates difficulties for businesses and burdens households. The expectations, therefore, also concern the facilitation of Cypriot citizens’ access to reasonably cheap and fast financing,” Christodoulides said.

Investors and rating agencies

In his response after the ceremony, Patsalidis referred extensively to the Cypriot economy, “which is recognised and appreciated by foreign investors and rating agencies, noting that it exhibits, among other things, growth, a reduction in inflation, a reduction in unemployment and public debt.

“These are important elements that help shape enviable progress among European partners.”

Opposition AKEL was quick to criticise the appointment, saying President Christodoulides, “decided to appoint (Christodoulos Patsalides) to the crucial post of Central Banker, who during the critical period of the banking crisis and banking scandals was in charge of the Bank of Cyprus.

“This person’s background is inconsistent with the credentials required to accompany the central banker. It is worth wondering what message the President wants to send: that he wants to delete the banking crimes which were unanimously found in the conclusion prepared by the parliamentary ad hoc committee?

“Additionally, we note that in a report prepared by Alvarez & Marsal on the purchase of Greek bonds by the Bank of Cyprus during the [2012-2013] banking crisis in Cyprus, that data was mass deleted from Mr. Patsalidis computer, while there was a specific order from the Central Bank not to delete anything.”

Up until 2011-2012, Bank of Cyprus bought toxic Greek government bonds that resulted in its downfall and subsequent bail-in using depositors’ accounts and second rescue by private investors, while the Popular Bank of Cyprus (Laiki) collapsed.

Asked to comment on AKEL’s criticism of the appointment of the new Governor of the Central Bank, President Christodoulides did not respond directly to the allegations.

He said that, “I did not expect AKEL to make such a comment. It was during the AKEL administration that we had three Ministers of Finance, all of them bankers. So, before we go out and make statements, it’s good to be a little careful.”

During the AKEL administration under President Demetris Christofias, from 2008 to 2013, the Finance Ministers included Charilaos Stavrakis and Vassos Shiarly (ex-Bank of Cyprus) and Kikis Kazamias, former head of the Limassol Cooperative Bank.

The first to congratulate Patsalides on his appointment was the Laiki depositors’ association, whose chairman, Adonis Papaconstantinou, said, “there are still pending issues concerning our association and members in relation to the Central Bank.”

He called for a meeting the soonest, “to discuss the outstanding issues.”

After its collapse, Laiki was absorbed by Bank of Cyprus, while its assets were placed under an administrator appointed by the Central Bank.

Depositors fear that the ex-Laiki assets have systematically been depleted and despite promises by successive governments, they will never recover their lost investments.