The Bank of Cyprus, the island’s biggest lender that has just come out of resolution following a bail-in recapitalisation by large depositors of 8 bln euros, has reduced its staff numbers by 25% and staff costs by 35%, it said on Friday.
The cost of the redundancy package was not disclosed.
The bank announced that 1,370 people had taken up the voluntary retirement scheme launched a month ago, reducing its joint workforce, including former Laiki Popular staff, from 5,760 to just under 4,400.
Up until last Friday, only 500 had opted for the scheme as the trade union had not given the green light. A week’s extension was given and the offer on the table expired on Friday.
The bank said that salary cuts also contributed to lowering staff costs, with the restructuring plan aiming to “significantly reduce operating costs, improve efficiency and enhance profitability and thus create value for the shareholders.”
The redundancy package included one monthly salary for every two years of service and a bonus of 7 monthly wages, as well as a 50% withdrawal from staff pension funds. However, bank staff will have to pay off any debts to the bank before leaving, having enjoyed lower interest rates and other benefits. The bank also set a cap on the payout which should not exceed 150,000 euros.
The 1,370 will also be entitled to 6 months’ state unemployment benefit that pays about 60% of the average salary of the past three years.
The bank exited the state of resolution on Wednesday after the final haircut on unsecured deposits above 100,000 euros was locked at 47.5% and will be reimbursed in new shares, with 15% of the initial deposit released to customers and the balance held in long-term fixed deposit accounts.
The conclusion of the haircut saga, created after the Eurogroup’s demand for a bail-in to pay for the rescue of the Bank of Cyprus that was burdened with the bankrupt Popular Laiki, also puts an end to uncertainty in the market that has been hampered by capital controls and cash flow in the market drying up.
With a Core Tier 1 ratio at 12%, the bank has been reinstated as an eligible counterparty by the European Central Bank (ECB) for monetary policy operations and the ECB funding will be under improved terms, given that the rate for main refinancing operations stands at 0.5%.
The bank is expected to call its first post-resolution AGM on or about September 12, with the legacy Laiki depositors taking 18% of the new shares, other depositors 81% and the former Bank of Cyprus shareholders diluted to just 1%.
