By Elias Hazou
ATTORNEY-general Petros Clerides has instructed police that an ongoing criminal probe into the near-collapse of the financial sector must extend to central bankers and their administrations.
In a letter to the police chief, dated July 8, Clerides notes that investigations “are not restricted to the banks in question [primarily Laiki and Bank of Cyprus] but extend to potential criminal liabilities of regulatory authorities, such as the Central Bank and, possibly, governmental departments.”
From the letter, revealed by Politis yesterday, it may be inferred that former Central Bank of Cyprus (CBC) governors Christodoulos Christodoulou and Athanasios Orphanides (pictured) could come under the spotlight of criminal investigators.
That’s because the probe covers banking activities spanning the time period 2006 to 2013, during which the CBC was under the watch of Christodoulou and, later, Orphanides.
It remains to be seen whether or how far the probe will also be looking into current CBC chief Panicos Demetriades, appointed last year and whose stint coincided with the beginning of the end for Laiki. That might prove tricky, as the Central Bank has been designated as one of the agencies that will assist police with their investigations.
In his letter, Clerides outlines and reiterates the scope of the investigation. These are: the transfer of capital from Laiki to Marfin and to Laiki’s Greek operations, as well as loans given by the latter two or their subsidiaries or branches to businessmen in Greece; the issuing of securities to Laiki and Bank of Cyprus customers; the banks’ purchase of Greek government bonds; and Laiki and Bank of Cyprus expansion abroad, in particular Bank of Cyprus’ acquisition of Russia’s Uniastrum Bank and Romania’s Banca Transilvania.
Police will be assisted in their work by various agencies, including the Central Bank (despite the fact that its regulatory role is under scrutiny), the Securities and Exchange Commission and the anti-money laundering unit MOKAS.
In addition, financial experts would be appointed as criminal investigators as the need arises.
Significantly, police are urged to make use of the findings of financial forensic experts Alvarez & Marsal, whose report into banking activities is described by Clerides as being “particularly useful.”
Other material investigators can draw on include the report compiled by the administrator of Laiki, the testimonies before the public committee of inquiry, and reports prepared by the Bank of Greece and the CBC.
Cypriot banks lost some €4.5 billion when European Union leaders agreed in late 2011 to a Greek debt write-down, designed to make that country’s debt burden more sustainable.
Problems in Cyprus, which joined the euro zone in 2008, snowballed into the winding-down of Laiki under a mountain of debt and a large chunk of deposits exceeding €100,000 being converted to equity to recapitalise Bank of Cyprus.
In May 2012 the government, itself cash-strapped, underwrote €1.8 billion to prop up stricken Laiki.
Among other things, bankers here are under scrutiny for taking risks by investing in Greek government debt at a time when European lenders were limiting their exposure.
Wary of accusations of a whitewash, the government last week decided on a criminal probe after it became apparent that a committee of inquiry would steer clear of a wide range of issues.