Every year… and better for bank workers – They close stores to cut costs
The closure of Laiki, Synergatismos and RCB Bank, three banking events that stand out.
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By Panagiotis Rougalas
Bank managements continue to be concerned with the reduction of their costs, despite the kilometers of road that Cypriot banks have traveled in relation to the limitation of their branches and capacity. Of the 848 bank branches that existed in Cyprus in 2012, 162 have remained, while at the level of employees, out of the 12,815 employed in banks in the disputed year of 2012, fewer than 6,481 are now employed. And “less than 6,481” is recorded because Astrobank announced at the beginning of July that it proceeded to reduce another 30 employees. This demonstrates that, even in a period of high interest rates and high profitability, banks are proceeding with staff reductions and the implementation of a more general cost reduction plan. The banks have made a great effort to reduce their staff and their branches, but in the last 10 years three events stand out. The closure of Laiki, Cooperative and RCB Bank (at least as we knew it as it operates under another model – regime as a result of Ukrainian decisions).
Going back to the numbers, every year… and better for bank employees. In 2013 alone, 1,500 employees were axed, as they were reduced to 11,105, while branches also decreased to 680. In 2014, employees reached 10,916 and branches reached 614. In 2015, 10,939 bank employees were employed and 560 branches were operating. (308 banks plus 252 Cooperatives). In 2016, the steady reduction of employees and stores continues. Specifically, 10,615 employees were employed and 542 stores were in operation. In 2017, bank employees increased by 12 to 10,627, but branches decreased significantly to 458.
In April 2013, after months of negotiations, the Cypriot authorities reached an agreement regarding the financial support program to which the Troika contributed.
2017 – 2018 was the turning point, when the Partnership closed. In 2018, bank employees decreased to 8,940, while branches that remained active were 384. In 2019, the decrease continued, with employees being 8,548 and bank branches 326. In 2020, the “scissors” in branches and employees continued, reaching the 238 and the employees 8,175. In 2021, several voluntary exit programs took place, leaving 218 stores and 7,463 employees. In 2022 the forced decision of RCB Bank was made which forced it to change its character and so from the end of 2022 and after several voluntary programs by the banks, now as mentioned above, there are 9 banks in Cyprus, 162 branches, 6,481 bank employees and 334 ATMs.
Lay and STI
As reported by the Cyprus Banks Association in its previous publications, the Cypriot authorities requested financial assistance from the European Union in June 2012. In April 2013, after months of negotiations, the Cypriot authorities reached an agreement regarding the financial support program in which was contributed by the International Monetary Fund, the European Commission and the European Central Bank ('Troika'). This agreement was preceded by a decision by the Eurogroup, which resulted in the significant reduction of the size of the banking sector in relation to the economy, as well as the consolidation of the second largest bank in Cyprus and the restructuring and recapitalization of the largest bank. The domestic banking sector, including MFIs, accounted for 550% of GDP until 2012. As a result of the Eurogroup decision and subsequent measures, the Cypriot banking sector shrank sharply to 350% of GDP.
Parliament passed legislation establishing the framework for the recovery and resolution of credit institutions, whereby the Central Bank of Cyprus was designated as the resolution authority for banks and SFIs. Based on the new framework, the People's Bank of Cyprus and the Bank of Cyprus entered a resolution regime. Bank of Cyprus was fully recapitalized using shareholders' and bondholders' funds and the conversion of 47.5% of unsecured deposits into equity capital. Laiki Bank's operations, secured deposits, part of the loans and Emergency Liquidity Assistance (ELA) were transferred to the Bank of Cyprus. The unsecured deposits and other assets remained with the People's Bank of Cyprus, which is in liquidation. As the value of the transferred assets was greater than the value of the liabilities, the entity under liquidation received Bank of Cyprus shares corresponding to 18% of the share capital. Insured depositors (comprising over 95% of the total number of account holders at the two affected banks) were fully insured. In addition, the Greek subsidiaries of Cypriot banks were sold.
As part of the funding programme, the strategy for Co-operative Credit Institutions was defined and all LFIs agreed to voluntary mergers under a restructuring plan, which aims to return the sector to viability and profitability. All mergers were completed by March 2014, resulting in 18 Cooperative Institutions (out of 93).
The state acquired 99% of the capital of the SPIs which are in the process of recapitalization, through €1.5 billion .state aid with funds from the support program. Hellenic Bank was successfully recapitalized with private capital (including foreign investors) without the need for state aid.
Hellenic and SKT
In 2018, the process of selling the Partnership began. The final buyer was Hellenic Bank which bought the healthy part of it and acquired the size it has today. The bad part of the Cooperative was transferred to another (non-banking) entity, KEDIPES.
On September 3, 2018, the business transfer transaction of the former Cyprus Cooperative Bank to Hellenic Bank was completed on the basis of a related business transfer agreement signed on June 25, 2018.
In accordance with the provisions of the Agreement, on December 18, 2018, the two parties completed the valuation of the Assets and Liabilities transferred to Hellenic.
In particular, loans of 4.27 billion, bonds of 4.07 were transferred to Hellenic. billion, cash and deposits in banks 1.01 billion and other assets 79 million euros. The total assets transferred to complete the Agreement amounted to 9.4 billion and after the valuation adjustment according to the agreement to 9.14 billion euros.
The latest act
Russia's invasion of Ukraine and the sanctions imposed did not leave RCB Bank untouched, as the decision was made to transform the bank at the end of March 2022 into a supervised asset management company (asset management company). Its banking operations would be phased out. From 24 March 2022 RCB Bank, in agreement with the ECB Banking Supervision, took the decision that it would cease to enter into new relationships with customers for both deposits and loans. The Bank would follow a specific schedule and procedure for the completion of existing customer relationships. All obligations to the bank's customers would be paid in full and it had been agreed with the ECB's Banking Supervision that an audit firm (Deloitte) would undertake to control the process of finalizing the bank's settlements with depositors, thus ensuring the orderly termination of depositor relations.