News Column

Our View: Good sense finally won the day at BoC

August 28, 2014

IN THE END, fears that the one billion euro capital issue by the Bank of Cyprus would not be approved by the EGM proved unfounded. Yesterday's vote was not even close, with 87 per cent of shareholders present backing the issue and paving the way for the biggest foreign direct investment in the history of Cyprus.

Although the chairman of the board and the CEO had to respond to awkward questions from the old shareholders of the bank some verging on the hostile during the marathon meeting, the argument that this was the only secure way forward for the bank won the day. It was very difficult to argue anything else, given the precarious position the bank was in and the stress test it is scheduled to undergo in October.

The new investment will make the Bank of Cyprus one of the best-capitalised banks in Europe, said CEO John Hourican for whom the capital issue was a personal victory. He had encountered opposition to the issue, which he felt was the best way to shore up the ailing bank, from many quarters including a significant number of his directors who had repeatedly tried to prevent it. However he pulled this off thanks to the full backing of the finance minister and the governor of the Central Bank who, at one stage, threatened to sack the board of directors.

At Thursday's meeting most of the arguments heard against the issue were emotional and came with a high nationalist content. There was mention of the Turkish invasion, of defending the homeland from the Turks and of the danger of the systemic bank being controlled by foreigners which Hourican quite rightly dismissed as xenophobic and incompatible with modern business practice. One of his remarks put the matter in its proper context and reminded us that leadership needs to have a clear vision.

"We have to change this debate from one about foreign investors coming in to loot our banks to one of serious foreign investors showing confidence in us and the prospects of our banks. The idea that funds are here to strip assets is nonsense. Some of the most sophisticated investors in the world have checked the numbers and decided that the Bank of Cyprus and you as a collective are worth investing in. That is something to celebrate and not denigrate."

Unfortunately, the celebrating should be put on hold for now, because our politicians could still wreck everything by voting against the foreclosures bill on Monday or watering it down so much that the troika would refuse to accept it.

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Source: Cyprus Mail

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