By George Psyllides
THE island lost billions from the sale of the Greek operations of Cypriot banks as part of a bailout agreement, lawmakers said yesterday, as the debate over the transaction raged on.
DIKO MP Nicolas Papadopoulos said Cypriots lost €3.4 billion in the deal, while Piraeus Bank, the Greek lender that bought the operations, profited.
“Some lost, some won in this deal. In Cyprus we’re crying, in Greece they’re celebrating. This is the reality,” Papadopoulos said following a closed session of the House Ethics Committee.
Bank of Cyprus (BoC), Laiki, and Hellenic, were forced to sell their operations in Greece as part of the island’s €10 billion bailout agreement with international lenders.
The banks had disagreed with the deal, which aimed primarily to ring-fence the Cypriot banking system and prevent its chaotic bailout spilling over to Greece.
The Central Bank (CBC) said it had been a political decision.
The sale had been set by international lenders as a condition for the bailout, the CBC said.
Papadopoulos said it was a political decision for Cypriot depositors to pay Greece’s losses to limit the systemic danger and shield the Greek market from a collapse of the island’s banks.
CBC Governor Panicos Demetriades, according to Papadopoulos, conceded before the committee that Laiki and BoC had been made insolvent because of the sale.
The CBC later sought to clarify that the two lenders were considered solvent because of the prospect of recapitalisation through a support program.
That changed however when MPs rejected a proposal to impose losses on insured and uninsured deposits on March 19, the CBC said.
“Under the circumstances at the time, there was no other choice than to sell the two Cypriot banks in Greece since this had been set as a condition to approve the support program,” the CBC said.
The operations eventually went to Piraeus Bank for €524 million.
AKEL MP Aristos Damianou described the deal as a sell-off and “part of an economic crime perpetrated against our people.”
“We are talking about some €3.5 billion in loss,” Damianou said.
His AKEL colleague Irini Charalambidou also raised another issue. Piraeus chairman Michalis Sallas had been granted loans — through three companies — worth 150 million whose collateral had been inadequate, Charalambidou said.
The loans were used to buy shares at Piraeus.
At the time of a CBC audit in June 2011, the outstanding amount was €112.5 million with the collateral being a letter of guarantee from Piraeus worth €7.5 million and 66.2 million Piraeus shares.
The CBC demanded from Laiki to raise its provisions regarding the loan to €87.8 million.
On top of that, two companies whose beneficiary was a Piraeus Bank official owed Laiki €21.5 million and the only collateral were 12.8 million Piraeus shares. The CBC asked for provisions worth €18.16 million.
The loans were among a large number of so-called bullet loans (loan that requires a balloon payment at the end of the term) granted by Laiki in Greece whose purpose was the acquisition of shares.
The source of repayment was none other than the investment itself, according to the CBC, which described the loans as being a “significant risk for the bank.”