Exclusive: Bank of Cyprus kicks off review of restructuring plans

Tue Mar 25, 2014 1:02pm EDT
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By Laura Noonan

NICOSIA (Reuters) - Bailed-out Bank of Cyprus BOC.CY is reviewing its restructuring plans in a move that could result in billions of euros of its troubled assets being put into a "bad bank", chief executive John Hourican said.

Hourican took the top job at Cyprus' largest bank in October after it was rescued during an international bail-out of the island, which had run into financial problems partly because of the exposure to debt-laden Greece.

At that time, a plan to put the bank's 22 billion euros ($30.32 billion) of good and bad loans into one legal entity was just being finalized. This plan also envisaged the bank remaining reliant on some emergency funding from the Central Bank of Cyprus until 2017.

But Hourican, former investment banking head at Royal Bank of Scotland (RBS.L: Quote), wants to look again at all the options.

"We have appointed HSBC to help us look at our overall corporate finance agenda including the entire structure of how the group is organized," Hourican told Reuters in an interview.

"What I'd like is to re-open the entire option list for the bank - do we continue with the plan we currently have? Is there a possibility of a more formal good bank/bad bank? Is there another set of options we could approach in terms of accelerating our restructuring plan?"

The creation of a bad bank would free Bank of Cyprus from its problem loans and make it easier to forge a "normal" bank better able to fund itself and support the country's economy. The bad bank was considered as an option in the terms of Cyprus' 10 billion euro bailout from the European Union and International Monetary Fund.

Bad banks have been used successfully to cleanse banking systems in Ireland and Spain, and one is being created in Slovenia.   Continued...

Bank of Cyprus Chief Executive John Hourican attends an interview with Reuters in Nicosia March 24, 2014. REUTERS/Andreas Manolis