By Stefanos Evripidou
THE CYPRUS Securities and Exchange Commission (CySEC) yesterday slapped fines worth almost half a million euros on the Bank of Cyprus (BoC) and six former top brass over their failure to inform the investing public of the sizeable purchase of Greek government bonds three years ago.
According to a CySEC press release, administrative fines totalling €460,000 were imposed on the BoC and six former senior officials for failing to announce to the Cyprus Stock Exchange the purchase of €2.4 billion worth of Greek government bonds in 2010.
The BoC made significant purchases of Greek government bonds on January 12 and April 27 in 2010, but omitted to inform the investing public “as soon as possible”, meaning the following day.
The CySEC said on both occasions the failure to announce the purchase of Greek government bonds to the Cyprus Stock Exchange the day after their purchase resulted in violations of Article 11(1)(a) of the Law 116 (I) of 2005.
As a result of the double violations recorded on January 13 and April 28, 2010, the Commission slapped a €160,000 fine on the BoC, €140,000 on former CEO Andreas Eliades, €120,000 on former executive director Yiannis Kypris, and €10,000 each to former members of the board’s risk management committee Giorgos Georgiades, Andreas Artemis, Costas Zeveris, Costas Hadjipapas.
Eliades and Kypri were fined for being at “fault and negligent” for the two violations.
Regarding Eliades, the CySEC report said: “As head of the leadership structure of the company he had more than any other person the responsibility and ability to ensure that the company has at all material times complied with the relevant legislation.”
The commission added: “Timely information is of vital importance for the protection of investors.”
Not only were investors not properly informed on the bank’s investment in Greek government bonds by January 13, 2010, but instead, they were told by Kypri on December 10, 2009, that investing in Greek government bonds was risky, and were reassured by him that the bank had sold almost all its Greek bonds, said CySEC.
Recalling that Greek bonds have been downgraded by rating agency Standard and Poor`s to junk, the Commission noted “when an investment amounts approximately to the size of the bank`s own capital, the least the average rational investor would expect is to be informed, which was not the case”.
On the Greek bond purchases on April 27, 2010, CySEC said it was particularly important for the bank to have announced this the following day, since investors would have been informed on the high ratio of the BoC`s investment in Greek bonds (amounting to €2.4 billion) compared to the bank’s own capital (€2.5 billion).
Following the Greek sovereign debt haircut, the island’s two largest lenders, BoC and Laiki (Popular) Bank, posted mammoth losses after writing off €4.5 billion from their Greek bond holdings. Both banks requested state aid, prompting Cyprus to request financial assistance from the troika on June 26, 2012.
The final agreement on an international bailout invited the eurozone’s first substantial ‘bail-in’ of depositors of the two banks in exchange for a €10 billion bailout.
It also resulted in the winding down of Laiki and the restructuring of BoC, which was also lumped with Laiki’s €9 billion debt to the European Central Bank in emergency liquidity assistance.