Arab Bank announces end of operations in Cyprus

Download article in original language : CY0510101NCY.DOC

In September 2005 Arab Bank addressed a letter to the Minister of Labour and Social Insurance in which it announced the termination of its business activities in Cyprus.

In a letter to Minister of Labour and Social Insurance dated 6 September 2005, Arab Bank announced that it would cease operations in Cyprus and dismiss its 176 employees.

Specifically, the letter from Arab Bank officially rejected the Ministry of Labour’s mediation proposal submitted on 2 September 2005 with regard to efforts to resolve a labour dispute between the Bank and the Cyprus Union of Bank Employees (ETYK).

It should be noted that this labour dispute arose in the context of the restructuring process begun by the Bank in December 2004, which was aimed at reducing labour costs. According to its former Country Manager, Jack Beighton, wages made up 75% the total operating costs of Arab Bank, which has been operating in Cyprus since 1984. In order to remain competitive and retain part of its business in Cyprus, the bank decided to cut back on labour-intensive services, by dismissing a total of 68 employees. The dispute between the bank and ETYK mainly involved the amount of these employees’ severance pay.

Specifically, the bank was willing to pay compensation in the range of CYP 2.5 million, representing 6.5 weeks’ pay for each year of service, over and above the compensation from the Redundancy Fund and based on the procedures provided for collective dismissals. By contrast, ETYK demanded that the employees be granted pensions on the basis of voluntary early retirement, a procedure whose cost would have been around CYP 5 million. Finally, the Ministry’s mediation proposal involved approximately CYP 3 million in compensation, representing nine weeks’ pay for each year of service.

Despite initial strong opposition on the part of ETYK, whose President called Arab Bank’s attitude particularly provocative both towards the Ministry and the institutions and also towards its employees and their representatives, after direct intervention by the Cyprus Central Bank there appears to be a possibility that negotiations will continue. One indication of this development is a statement made by the bank’s new Country Manager, Sami Makarem, on 14 September 2005 referring to the possibility that Arab Bank may remain in Cyprus.

This information is made available through the European Industrial Relations Observatory (EIRO), as a service to users of the EIROnline database. EIRO is a project of the European Foundation for the Improvement of Living and Working Conditions. However, this information has been neither edited nor approved by the Foundation, which means that it is not responsible for its content and accuracy. This is the responsibility of the EIRO national centre that originated/provided the information. For details see the "About this record" information in this record.