The island’s largest lender has been undergoing restructuring since March, after a decision by eurozone finance ministers to impose losses on deposits of over €100,000. Under that arrangement, previous shareholders were wiped out, making large savers the new shareholders via a deposit-for-equity swap. The Central Bank, in its capacity as the ‘Resolution Authority’ for Cyprus’ two affected banks - BoC and Laiki - has appointed the members of the BoC’s transitional board of directors.

The bank’s status was discussed at length yesterday during a meeting between the president, the Central Bank governor and the interim board of the BoC. Speaking to reporters after, government spokesman Christos Stylianides confirmed that the bank’s board would select and appoint a new CEO “sometime over the next few days”.

The appointment of a new CEO - which must be rubberstamped by the banking regulator - is seen as a key step towards returning the stricken bank to normalcy. Stylianides said the selection of a CEO is first and foremost an issue for the bank board, but added that any decision would be taken in consultation with the CB chief and the finance minister. “It was agreed today that the person appointed to the job must be competent, that he can deal with the current challenges facing the bank, and that the appointment must be made as soon as possible,” the spokesman said.

Press reports suggest that banker Michalis Kolakides is a leading candidate for the job. Alithia reported that the58-year-old Kolakides, who has been approached by the government, has asked for time to consider the offer.

Kolakides, currently deputy CEO of Eurobank EFG, has previously held senior positions with Citibank Greece and Piraeus Bank, and has served on the board of the National Bank of Greece. He holds an economics degree from the London School of Economics and an MBA from London Business School.

The government has made no secret of its displeasure with the slow pace of restructuring at the BoC. Previously, the finance minister had pointed the finger at CB boss Panicos Demetriades, who initially promised to wrap up procedures by early this month but later hinted that the restructuring might not be complete before September.

Restructuring the lender will take time, however, due to a string of lawsuits filed by depositors against the decision to seize their cash. Stylianides noted yesterday that any legal obstacles would be overcome once the bank exits its state of administration. He said also that the government, in a display of confidence toward the banking sector, has decided to “boost and expand” the state’s banking transactions via Cypriot lenders, but did not elaborate.

Responding to a question, Stylianides said the government as well as the CB are keen on finding a strategic investor to invest in the BoC. But that will have to wait until the bank can run its own affairs, he added.

BoC’s restructuring in March resulted in a drastic shake-up and dilution of the shareholder base. As stated by the CB chief last week, some 70 per cent of the savings affected by the deposit-for-equity swap (uninsured deposits) belong to non-Cyprus residents. Uninsured depositors - which have suffered a ‘haircut’ of at least 37.5 per cent - are now the new owners of BoC.

Financial website Stockwatch reports that no single uninsured depositor now possesses over 2 per cent of bank stock - making it difficult for the new shareholders to be adequately represented on the board of directors.

On the capital restrictions and when they might be further eased, the spokesman said the government was awaiting the return of the finance minister - currently in Brussels - so that he could confer with the banking regulator. A new decree on capital controls should be expected by Friday once the current one expires, said Stylianides.

Local media speculated that the new decree would permit companies to open accounts in banks other than in BoC and Laiki - so far prohibited - thus giving entrepreneurs access to more liquidity and enabling them to transact business more easily.

The previous decree exempted four credit institutions operating in Cyprus from the capital restrictions imposed on Cypriot banks: BLOM Bank SAL, Lebanon & Gulf Bank SAL, OJSC Promsvyazbank, and Russian Commercial Bank (Cyprus) Ltd.

It stated however that these banks are prohibited from servicing domestic customers that maintain accounts with their head office, or soliciting and obtaining new business from domestic customers or opening new accounts for domestic customers.

Source: Cyprus Mail