A RUSSIAN bank acquired by Bank of Cyprus (BoC) in 2008 had a bad record and did not follow good banking practices, a Central Bank licensing department official told an inquiry on Thursday.
Testifying before a commission tasked with investigating the island’s economic collapse, Alexandra Theofilou said she had prepared a report recording the pros and cons of Uniastrum Bank, which cost BoC €371 million.
BoC bought 80 per cent of the lender while the remaining stake is held equally by Russian businessmen Georgy Piskov and Gagik Zakaryan..
Theofilou described Uniastrum as a bank with a “bad record, which apparently did not follow prudent banking practices. Its cons were much more than its pros.”
The inquiry heard that before 2007, Uniastrum made cash payments to employees that were not recorded and “did not comply with its tax obligations – an important negative point that was later reversed.”
Of the cost, Theofilou said data submitted by BOC showed it was better compared with other acquisitions in Russia at the time “and the bank’s advisers were of the view that the price was reasonable.”
A findings report on the acquisition compiled by financial forensic experts Alvarez and Marsal said that BoC went ahead with the purchase despite misgivings in due diligence reports and a legal opinion that judged it could opt-out of the deal or renegotiate the acquisition price.