By Poly Pantelides
THE island’s biggest bank was dominated by its CEO who bought large numbers of Greek bonds without consulting other board members, a former Bank of Cyprus (BoC) chief executive said on Thursday.
Yiannis Kypri told an inquiry into the Cyprus banking sector’s near-collapse that in late 2009 and early 2010 former CEO Andreas Eliades raised the lender’s Greek bond portfolio without consulting the executive board. By December 2010 the BoC held €2.124 billion worth of Greek bonds, according to data obtained by the committee of inquiry.
“There were problems with company management, (BoC) culture and transparency particularly in the way the CEO at the time took decisions,” Kypri said referring to the BoC. He referred to Eliades’ term as a “monocracy”.
Kypri said after the fact, Eliades had told the BoC executive board that there was no risk of Greece defaulting.
But although the Central Bank wrote to Eliades in March 2010 warning him of the Greek debt exposure risk, there was no written follow-up for another two years, Kypri said, agreeing with the inquiry that supervision had been inadequate.
Kypri also took issue with a reference by former BoC deputy CEO Charilaos Stavrakis who stepped down in 2008 to take up a finance ministry post, who previously described himself, Kypri and Eliades as part of a dream team.
“The phrase, dream team, does not express me,” he said.
Kypri said that although Eliades, Stavrakis and Kypri were theoretically a management trio, in practice Eliades was involved in all BoC goings-on and was fully backed by the board. “This prevented other executive members from expressing their opposition,” Kypri said adding that when the board was asked to pitch in on the matter, the board said it would be more effective if there was only one boss.
But Kypri defended the decision to acquire Russian bank Uniastrum, although he conceded the BoC overpaid for it and would have made a loss selling it off. Kypri said auditors Ernst and Young and law firm White and Case carried out all possible due diligence checks prior to the purchase and consultants JP Morgan were also asked to weigh in on the acquisition.
BoC incurred huge losses during a Greek debt write-down in 2011, and was forced to request a state bailout in the summer of 2012.
Meanwhile, although depositors were worried over reports there might be a ‘haircut’ on their deposits as part of Cyprus’ bailout deal as later proved to be the case, the BoC would refer them to a letter from the Central Bank’s press office that a raid on deposits would be unconstitutional, Kypri said.
As part of the terms of an EU/IMF Cyprus bailout, BoC is now in administration while the island’s second biggest bank, Laiki, is being wound down and is being merged with BoC. Ending up with Laiki bank branches and staff as part of Laiki’s resolution, is “damaging” to the BoC, Kypri said. The Bank of Cyprus has also been landed with over €9 billion in Laiki’s emergency liquidity assistance even though the assets transferred over to the BoC might not cover the sum, he said.
Cabinet is due to discuss the committee of inquiry’s future today, after the committee backtracked on its mandate last week. The panel cited legal arguments on why they would not be touching matters of court proceedings, such as the Uniastrum acquisition deal. Following the decision, the attorney general ordered police to launch criminal investigations in relation to the country’s financial mess.