"Embracing competition as a way to success"
Do you believe that the ECB's monetary policy will be effective in taming inflation promptly?
In recent years, the international economic environment has been challenging due to a series of different and successive crises. In economics, the reduction of inflation is achieved by central banks tightening monetary policy. As regards the eurozone, the European Central Bank regularly assesses certain data on the eurozone economy. Based on such assessment, the ECB has decided, among other measures, on a series of interest rate increases. For now, inflation exceeds the 2% target but it is significantly lower than at the same period last year, so the ECB`s policy seems to be working. On the other hand, it is essential to have concerns about monetary policy since raising interest rates too much and keeping them too high for too long will lead to a recession. A mild recession or a slowdown in growth may be a natural consequence in these circumstances. What we do not want to see is a tightening of monetary policy leading to a deep economic recession, which may cause greater problems than those it seeks to resolve. So it should be implemented very carefully.
Although you have got rid of most of the non-performing loans, how may the bank be affected by a further relaxation of the framework for divestments?
What everyone should understand is that possible relaxation of the legal framework for divestments will affect not only banks. Yes, the problem of non-performing loans may have been reduced significantly, especially on the balance sheets of the systemic banks, but it still exists in the real economy and is reflected in the level of private debt. The fact that Moody's upgraded us to investment grade only recently, more than 11 years after the financial and banking crisis that hit the Cypriot economy, proves in the clearest possible way that there is no room for a setback.
Since 2014, there have been constant proposals from rating agencies, as well as from institutions such as the Commission, the European Central Bank and the International Monetary Fund, to intervene in the legislative framework which in fact has not been allowed to function freely until today due to constant suspensions. We need stability because this is the only way to get our economy moving, to gain the confidence of foreign investors and to remain committed to the essential goal of sustainable growth.
The time necessary to collect debts in Cyprus is already very long, and it increases the risks for a bank considering a loan. This can affect the cost of borrowing and, ultimately, the ability of households and businesses to access financing.
People who are really facing problems, the truly socially vulnerable, are protected and supported by the targeted schemes implemented by the state, such as Hestia, Housing, Rent for Instalment, etc. Paradoxically, these schemes have not had the expected response from the theoretical beneficiaries, and this should be a cause for concern.
Do you believe the Bank of Cyprus is flexible enough to deal with borrowers who are in real trouble?
Banks are constantly in the crosshairs but the Bank of Cyprus has a proven track record of standing by its customers to support them whenever they have problems. This is what we did during the pandemic. We declared this even before the interest rate rally started and we put it into practice. A number of loans was renegotiated in 2023 in the total amount of €2 billion. We also announced a scheme to reward around 19.000 of our performing borrowers with home loans for first residence of up to €350,000 through our 'Antamivi' scheme. The cost of this scheme to the Bank is estimated at around € 4 million.
Moreover, we have introduced new schemes with attractive interest rates for home purchase with multiple interest rate options. One of these options is a 25-year fixed rate and instalment mortgage which helps protect young couples from interest rate fluctuations.
But still you have been criticised for your deposit rates and charges.
It is always easy to criticise banks. But the reality is that even though the amount of our deposits is almost twice higher than that of our loans, in recent months, we have introduced a number of new deposit products with attractive interest rates, such as our latest Step-Up scheme offering interest rates of up to 3%.
As regards fees, we have already taken a number of important and innovative steps. For example, existing and new customers of the Bank have the opportunity to open an e-Instant account (quick account) with zero administrative fees and with many other benefits.
We also offer a free youth account (ages 18-25) with a free subscription for a card. People aged 65 and over are eligible for special reduced commissions and fees.
There is a wide-spread problem today – in most sectors of the economy – in finding qualified staff. Could you explain the Bank's approach to attracting and developing talent, and to increasing employee engagement in the organisation?
Our recruitment practices are based on the principles of inclusion and on the objective criteria such as skills and talent. They are fully consistent with the principles of equal opportunity and non-discrimination in the workplace. We strive not only to attract but also to retain talented employees by providing them with opportunities supporting their personal and professional growth and development. Our compensation practices, on the one hand, preclude any discrimination against any candidate, upholding the right to equal pay for equal work. On the other hand, performance-based remuneration is implemented where possible.
What about the existing human resources: do you invest in their development?
As our staff is our driving force, actively contributing to the achievement and support of the Bank's vision, mission, values and culture, we continuously invest in new learning tools and alternative training methods. In 2022, a total of 3.106 employees of the Bank of Cyprus participated in 324 training programmes via webinars, e-courses or face-to-face trainings.
Since 2022, we have been implementing a new talent management initiative, the UGrow programme. It focuses on the development of selected talents of the Bank of Cyprus (BOC Talent) with the support of our experienced external partners. We also conduct regular performance and career development reviews of our employees, which helps increase their satisfaction. And employees` satisfaction, in its turn, correlates directly with improved performance. In addition, since 2018, we have introduced 'Extra Mile', a programme that recognises and rewards exceptional behaviour and actions of our employees.
How does the Bank of Cyprus address sustainability concerns and ESG (Environmental, Social and Governance) issues at the operational level and in terms of new lending?
For us it is not a concern but a necessity. Recognising the importance and potential of lending and investing based on ESG criteria, we already offer green loans and have started to invest in financial products that support ESG values. A high priority is given to a sustainable business portfolio. We provide financing not only to companies that can benefit from the green transition but also to businesses working diligently and actively to protect the environment.
In line with our strategy to achieve Net Zero by 2050, we are the first bank in Cyprus to estimate and disclose our Scope 3 financed greenhouse gas (GHG) emissions which represent approximately 88% of our gross loan portfolio.
Investors are now showing increased interest in ESG investments, while sustainability rating organisations and index providers are assessing the Bank's performance, actions and results in sustainable development. In 2022, Bank of Cyprus Holdings PLC received a rating of AA (on a scale of AAA-CCC) (2021: AA) in MSCI ESG Ratings, and we aim to continuously improve this rating in a sustainable manner.
How do you see the competitive landscape for banks changing in the nearest future, especially after the impending change in ownership of the Hellenic Bank? And how does the Bank of Cyprus plan to remain competitive and diversify further?
The interest of international investors in Cypriot banks is a very positive sign for the Cypriot economy as a whole and, as I already mentioned, is fully linked to the necessary stability. This is what we also noted during our recent presentation to institutional investors in London and other similar presentations.
Competition is a prerequisite for any sector to operate in healthy conditions, and we want the banking sector to be competitive. It is a stimulus for us to step up the pace, to introduce new and specialised products that meet the needs of our customers and to never stop improving the way we work.
The Bank of Cyprus has been a leader in the Cypriot market for many years and we have demonstrated this both through our track record and the innovations we have introduced in recent years. We are rapidly implementing a programme to transform and develop our business model with a focus on technology and customer service, which will enable us to successfully face not only banking competition but also the broader fintech competition which I believe will become more intense.
You have been leading the Bank of Cyprus since 2019 and you have successfully gone through various crises, the banking crisis, the Covid pandemic, the war. How do you deal with the challenges? Is there a particular way you handle difficult situations?
Our world has changed so much. Most crises that follow such changes are international or at least regional in nature, not local. So the first thing we have to do is to be adequately prepared for any scenario, even the extreme one. What we present every quarter about strong capital, liquidity and profitability ratios is not just about meeting regulatory requirements – it is a shield for the organisation and for our customers in difficult times, as we saw in practice during the pandemic. Our approach is twofold. On the one hand, we monitor developments and prepare scenarios for what might come next and how we can be prepared in the best possible way. On the other hand, we decide what options are available to us and take action for the best possible protection of the organisation from any adverse pace of developments.
An organisation as large and multi-dimensional as the Bank of Cyprus cannot and should not be led by a single person. While I have ultimate responsibility and accountability for all management decisions, I am surrounded by an excellent management team, by competent and qualified colleagues at all levels. All of them help implement decisions we take within the scope of their duties and responsibilities. This is why the Bank has progressed so quickly in all areas and, of course, it makes me optimistic about the future.