He had spent more than 30 years working for banks overseas including HSBC and Barclays. Cyprus ultimately agreed to close Cyprus Popular Bank, its second-largest bank, and transfer deposits under 100,000 euros ($128,800) into competitor Bank of Cyprus, a move that will cost thousands of employees their jobs and could wipe out all deposits above 100,000 euros. "Professionally today is the worst day of my life. People in the bank, they have been there a long time, a lifetime," Pavlou said.
He said he stepped down after the decision late on Thursday to split Cyprus Popular into a good bank and bad bank, because he disagreed with the strategy and felt he could do no more on the board. "To be fair to the rest of the board, they felt that the European Union would never let Cyprus go down, they would never let Laiki go down," Pavlou said in an interview at his home near Nicosia's finance ministry.
"I had a different view to that. I believed that there was that danger very clearly." Pavlou had supported Cyprus's original plan to tax deposits below 100,000 euros at a rate of 6.75 percent, a proposal that provoked outrage both locally and internationally since it breached a government guarantee scheme. It was ultimately voted down by Cyprus's parliament on Tuesday.
"Ten days ago when they came back from the EU with that solution, it wasn't easy but it was the best one," he said. "I knew in my heart that the next thing to come, it would be worse." Pavlou said the first plan was better because Cyprus Popular and Bank of Cyprus would have survived, albeit as smaller institutions, and that the measures would not have imposed such hardship on large depositors.
Those large depositors are "certainly not" all Russian oligarchs. "It's a lot of Cypriots who stayed loyal to the banks," he said, adding that pension funds also had large deposits at the bank. Pavlou said a significant amount of large deposits had flowed out of the bank in recent months but that closing the banks had prevented an avalanche of withdrawals in the week and a half after the announcement of taxes on deposits.