John Hourican: The $1 trillion was our main worry, not Libor fixing

He resigned as head of RBS's investment bank. Now at the Bank of Cyprus, he tells Nick Kochan how the City treated him

When John Hourican fell on his sword for the involvement of RBS in the Libor scandal in January 2013, the City wondered if he could recover his career.

It had never been alleged that the head of RBS's investment bank knew about the collusion, but some wondered what price Mr Hourican, 43, would have to pay for his involvement.

The news in October that the former head of RBS investment bank would be running Bank of Cyprus ended talk of regulatory stigma.

Fixing Bank of Cyprus will be straightforward compared with RBS.

"My previous job was running 52 countries and 26,000 people for RBS," he says. "This is less complex by some distance than the large investment-banking business that I was involved in fixing at RBS. But its strategic importance to the economy is similar and it has other complexities, one being its illiquidity."

Mr Hourican, who hails from the south of Ireland, looks slightly uneasy in the Mediterranean context. He wears a dark suit and tie that contrasts with the island's more-relaxed banking attire and, to maximise time in his office on the top floor of Bank of Cyprus's headquarters in Nicosia he did not move his family out from the UK.

A meltdown in Greek government bonds, where Bank of Cyprus had invested heavily, hurt. This occurred as Cyprus property market prices were in freefall. The economy was on the verge of collapse when the troika of the International Monetary Fund, the European Central Bank and the European Union agreed a €10bn (£8.3bn) bailout. The difference between this and all other eurozone bailouts is that depositors in the Bank of Cyprus had to pay for it from their own funds.

"This was an experiment in economics on an economy that was small enough to be experimented on by a federation," says Mr Hourican, "If it fails, the damage to the economy is extreme but the damage to the EU is not. The bail-in has removed the one thing the Cyprus banking system needs and that is confidence."

He has a reputation as a company doctor. Appointed head of the RBS investment bank in October 2008, in the wake of the UK Government's £20bn bailout, he slashed the worthless derivatives and mortgage loans on its balance sheet and sacked 10,000 people.

Stephen Hester, the bank's chief executive, was his partner in the cutbacks. Mr Hourican says Libor issues never crossed their desks.

"We had a bust bank. We didn't think data submission to a trade association was a high-risk part of what we were running when we had a trillion-pound balance sheet that needed to be managed. I would do the same thing again."

But when the Libor scandal broke, he felt he had to quit. "I hope my resignation sent a shudder down the organisation saying people need to take responsibility for things that happen on their watch."

When he joined Bank of Cyprus at the end October, moral was rock bottom.

"The bank had been recapitalised by its depositors, so we have the juxtaposition of having the people who dislike the bank the most owning us."

Russian oligarchs whose deposits were converted into equity had joined the bank's board and wanted to recoup their losses.

An assault on bad loans has been Mr Hourican's first priority. Cyprus's recession has left the bank, which recently posted nine-month losses of €1.9bn, restructuring some €6bn worth of loans to property developers.

Getting money back will not be straightforward, said one local lawyer.

"They will do all they can to put him off their backs. He has a fight on his hands. Many have disappeared."

Cypriots have spent many years playing cat and mouse with their banks, said one local banker.

Mr Hourican is not fazed. He says he has the backing of the President of Cyprus, who has simply told him to do "what's right".

Euan Hamilton, a former RBS colleague of Mr Hourican, is chasing smaller defaulters.

When he left RBS Mr Hourican says he didn't expect thanks, though "a gentle acknowledgement to the people who left the company having rescued it from Armageddon would be nice".

Now he has European and Cypriot authorities watching his efforts.

Mr Hourican has given himself three to five years to rescue the Bank of Cyprus.

Could it go down?

"I am not going to say no, because we have to work our way through the problems.

"I will be honest with the descriptions of the problems we uncover. I will be honest with everyone about how we are doing. Any other approach is misleading."

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Lou Reed distorted the truth about his upbringing, and since his death in 2013, biographers and memoirists have added to the myths
musicThe truth about Lou Reed's upbringing beyond the biographers' and memoirists' myths
News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the Apple Watch for you? Well, it depends if you want it for the fitness tech, or for the style
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own