Just attended the event featuring the CEOs of the three systemic Cypriot banks at the University Of Cyprus. I was a bit (unpleasantly) surprised by the fact that I was the only attendee to ask something not related to the management of NPLs. NPL management is merely the result of past bad lending practices, which is what my question related to – What are some of the bad practices that led us to this situation and how have you addressed them. Just to put this into perspective, if my roof has a whole and water starts pouring in, I’d rather fix the hole in the roof, not install better drainage systems in my house. I am amazed at how easily people get tunnel vision, focusing on what’s right in front of them at any given time, rather than at the root causes of their problems.
Replying to my question, Mr. Nicholas Hadjiyiannis, CEO of Cooperative Central Bank, said that they are now trying to examine the professionalism of the management prior to issuing new loans, as opposed to the old days when the existence of collaterals and guarantors was enough for someone to qualify for bank lending. He also pointed out that professional company management is hard to come by in Cyprus.
Mr John Patrick Hourican, CEO of Bank of Cyprus, added, -straight to the point- Show me your cash flows, not your collaterals.
These were ofcourse the replies that I expected to get from bankers who know their trade. What I did not mention in public, was that another attendant, working in one of these banks, told me earlier that his greatest concern with his portfolio was that companies did not provide him with their financial statements on time. In other words, he was only worried about has already taken place, instead of looking forward into the future at what may happen. Unfortunately, it appears that our banks may be suffering from a skills gap between middle and higher level management.
http://english.cyprustimes.com/2017/04/27/ceos-of-cypriot-systemic-banks-list-challenges-for-banking-sector/