Bank of Cyprus CEO pressed to resign

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The chief executive of Bank of Cyprus resigned on Tuesday, claiming his efforts to shore up the island’s largest lender were not being supported by board members and the government.

Andreas Eliades said in a letter to the bank’s chairman that “a joint mobilisation inside and outside the bank is needed to handle the problems we face ... as this is lacking, I am unable to carry out my duties.”

Mr Eliades’ departure followed an unexpected last-minute request by Bank of Cyprus for €500m in emergency state aid in order to meet EU bank capitalisation rules that came into effect on June 30, after announcing earlier that it would have enough funds of its own.Cyprus last month became the fifth eurozone country to seek an international bailout amid a banking crisis triggered by heavy exposure to Greek sovereign debt and mounting non-performing loans at Greek subsidiaries of Cypriot banks.

As a result Mr Eliades came under pressure to resign from both the finance ministry and the central bank, according to people involved in handling the banking crisis.

The Cyprus Securities and Exchange Commission has begun an investigation into accusations that the bank misled shareholders by failing to disclose its capital shortfall.

Mr Eliades oversaw a rapid expansion of the bank’s network in Greece and a move into Russia with the acquisition of Moscow-based Uniastrum Bank during his eight years as chief executive.

But he faced criticism for authorising the bank’s purchase of €2.1bn of Greek bonds in December 2009 and January 2010, when a bailout for Athens was already under discussion, without consulting the board. The bank took losses of 75 per cent on the bonds when Greece partially defaulted in February.

“This was an issue of risk management ... At that point, yields on Greek paper were high but it was imprudent to invest in Greek debt,” a member of the bank’s board said. The board should have been asked to make the decision.”

Bank of Cyprus has some €10bn of loans to customers based in Greece, equal to about 30 per cent of its total portfolio. Banks operating in Greece have seen a rapid rise this year in non-performing loans, which now exceed 15 per cent across the sector, according to analysts.