By Stelios Orphanides
Bank of Cyprus, the island’s largest lender, decided to refund losses sustained by 841 of its workers’ provident funds in the 2013 baking crisis at a cost of up to €23m, the Cyprus News Agency (CNA) reported citing the bank’s chief executive officer (CEO) John Hourican.
The bank’s decision is no longer linked to bank workers’ union Etyk acceptance of an overhaul of the bank’s remuneration system, including the way workers get incremental pay rises and promotions, the CNA reported on Tuesday citing Hourican.
The compensation to the provident funds will supplement a scheme announced by the government last year. In 2013, the government made €300m to compensate up to 50 per cent of the funds’ losses and in July 2017 announced additional €168m to compensate up to 75 per cent of the funds’ losses, prompting Etyk to cry foul.
On December 7, the cabinet decided to allocate another €20m. Four days later, Finance Minister Harris Georgiades said that Bank of Cyprus was ready to cover the remaining amount as part of negotiations with Etyk.
The government’s scheme covers those who already left the bank after 2013, when it absorbed the operations and the staff of Cyprus Popular Bank, widely known as Laiki, and excludes those who still work for Bank of Cyprus.
Hourican said that the issue had been “politicised” and added that the taxpayer cannot foot the bill which a private company should shoulder, according to the CNA. Still, the bank intends to cooperate with the winner of Sunday’s presidential elections.
“We were surprised to notice that the issue became political and the bank risked being dragged into the election procedure,” Hourican was quoted as saying.
The bank continues to be in favour of agreeing with Etyk an overhaul of the remuneration system in the context of negotiations, he said and added that Cypriot banks need to modernise labour structures in order for the Cypriot banking industry to survive.
Cypriot banks are struggling with around €22bn in non-performing loans or 45 per cent of their loan portfolio. Bank of Cyprus reduced its bad loans to 50 per cent of its total loans in September, a month after it was compelled to announce €500m in additional provisions for loan impairments.