Cyprus Mail

Inquiry said bondholders cases not within its remit

By Poly Pantelides

THE HEAD of an association representing the interests of people claiming they were duped into investing in high-yield bonds without being informed of the risks, testified on Monday at an ongoing committee of inquiry looking into the country’s near-financial meltdown.

The head of a group representing the bond holders, Phivos Mavrovouniotis, had asked the committee to investigate the circumstances under which the securities were issued, but the committee rejected the request because there were ongoing civil cases as well as a criminal investigation on the matter. However, the three-person panel decided in its majority last month to curtail its remit by not investigating anything relating to court matters, including lawsuits.

The committee’s head, Giorgos Pikis, said they had invited Mavrovouniotis to testify before they became aware of a string of filed lawsuits, and prior to being briefed by the attorney-general on the criminal investigations. So they would not investigate questions relating to how banks issued the high-yield bonds, Pikis said.

The Bank of Cyprus (BoC) and the former Laiki Bank stopped paying interest on the securities, after incurring losses from a Greek sovereign debt write-down in 2011. Many investors said they were told this was not a possibility, and some have said they lost their life savings when the banks stopped paying interest.

The securities offered a very attractive return of some 7 per cent in some cases, a better return than keeping the money in a savings account. Some bond holders have sued the banks claiming they were not properly informed of the risks.

Meanwhile, the attorney-general has instructed police to launch criminal investigations in relation to a number of matters, most surrounding the actions of what used to be the island’s second biggest lender the former Laiki Bank (now under resolution) and the island’s biggest bank, the BoC that is currently under administration. In addition, the banks are facing lawsuits by securities’ holders who claim they were duped into the investments.

Mavrovouniotis said he was not sure how many lawsuits have been filed, as his association does not represent all securities’ holders, but said to his knowledge lawsuits argue banks misled and defrauded investors, failing to comply with regulations stating that advice on high-risk products needs to be given to potential investors by qualified consultants.

He referred to a leaked central bank probe alleging banks downplayed or omitted mentioning risks and overstressed the benefits of a high yield. He also said parliament’s institutions committee also referred to irregularities in the way banks recruited investors.

Mavrovouniotis said the House Institutions Committee head, Demetris Syllouris, told him they had not yet received the Central Bank probe. “Are they trying to cover certain information, so do not submit a report which will confirm the banks’ unlawfulness…?” Mavrovouniotis said.



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