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Bank of Cyprus chief resigns over crisis

10 July 2012 23:59 (UTC +04:00)

Baku-APA. Chief executive of Bank of Cyprus Andreas Eliades has announced his resignation over a crisis rocking the island’s largest lender, APA reports quoting Xinhua.

In a resignation letter dated July 9 and made public on Tuesday, Eliades cited a lack of co-ordination and co-operation in dealing with the banking crisis in Europe.

However, media reports said Eliades, who became chief executive of the country’s largest lender in 2006, was under pressure to resign over big losses by the bank in 2011 because of its extensive exposure to the write-down of Greek debt and over the failure of the bank’s management to reveal its real situation.

The bank reported a loss of 1.37 billion euros (1.68 billion U.S. dollars) over depreciated Greek bonds.

It rocked the Cyprus economy in recent days when it unexpectedly announced it would need 500 million euros for recapitalization, after insisting for several months that it would not need state bailout.

Local media said the Central Bank was pressing for the resignation of Eliades for failing to tell a recent shareholders meeting that the Bank of Cyprus management could not raise the necessary funds for its recapitalization under instructions by the European Banking Authority.

The Central Bank was also reported to be pressing for the resignation of the top executives of the second largest lender, Popular Bank, which suffered even bigger losses in Greece and has asked the government to provide 1.8 billion euros to raise its core tier 1 capital to the required 9-percent level.

Inspectors from the European Union (EU), the European Central Bank and the International Monetary Fund who trawled the banking system of Cyprus after the island applied for EU bailout said the government would actually need up to 10 billion euros to recapitalize its banking system.

The inspectors are expected to return on July 16 to negotiate a bailout program, but Cyprus is not expected to receive any bailout funds before September.

This has forced the cash-strapped government to turn to three semi-state institutions - Telecomunications, Port and Human Resources Authorities - to ask for an urgent 275-million-euro loan to pay its employees and public pensioners over the next few months.

However, media reports on Tuesday said the government could only raise 175 million euros.

Nicolas Papadopoulos, the influential chairman of the parliamentary finance committee, said the government will actually have to raise 500 million euros by the end of July and a further 225 million euros by the middle of August, otherwise it would declare bankruptcy.

The government spokesman did not comment on the figures but said it was an exaggeration to say that the government would go bankrupt.