The entire board of the Bank of Cyprus was asked to step down by the Central Bank of Cyprus, and now the bank is expected to convene a general assembly as soon as possible. The governor of the Central Bank of Cyprus, Chrystalla Georghadji, sent a letter to the bank on Monday in response to the BoC’s request to permit Wilbur Ross a seat at the bank’s board. The Bank of Cyprus’ board is meeting Tuesday to consider the stern letter from the central bank.
Board limit capped at 13
The Bank of Cyprus earlier filed an application with the Central Bank of Cyprus requesting that U.S. billionaire Wilbur Ross be allowed a seat at the board. The request follows the billionaire’s investing over €400 million in Cyprus’ biggest bank. Ross controls 19% of the bank’s shares.
However, the governor of the Central Bank of Cyprus rejected the application, indicating that the board can’t number more than 13 people, with Wilbur Ross being the fourteenth.
On the contrary, the Central Bank governor directed BoC’s board members to step down and convene a general assembly to enable the new board to be chosen by shareholders. The governor indicated that both current board members and Ross will have an opportunity to be elected to the bank’s board at the shareholders’ general assembly.
Last month, in the biggest single investment in Cyprus’ history, the Bank of Cyprus raised €1 billion by selling shares to investors, including Wilbur Ross, the U.S. private equity specialist, and the European Bank for Reconstruction and Development. The share sale is expected to shore up BoC’s capital ratios ahead of this year’s European asset quality review and stress tests.
Bank of Cyprus: Message of distrust
Interestingly in July, the €1 billion share sale by Cyprus’ biggest bank that was led by American Wilbur Ross faced resistance with Archbishop Chrysostomos, head of the Eastern Orthodox Church of Cyprus. He urged his fellow Cypriots to reject the share sale. The Orthodox Church was among the largest shareholders in the bank before the financial collapse a few years ago, owning more than 3% of the bank’s shares and holding several seats on the bank’s board of directors.
In a message of distrust, the central bank’s governor warned Bank of Cyprus’ board to refrain from taking any executive decision that would impair its activities or burden future management with unnecessary responsibilities. Once the current board approves the final part of its recapitalization plan, which includes €100 million worth of shares offered to retail and old investors, the bank’s adjusted share register will determine the new ownership and the stock will be ready to resume trading on the Cyprus Stock Exchange.