Cyprus Mail

Large bank bonuses and loans slammed

"No rationale behind the way loans were given' at Laiki

By Poly Pantelides

LARGE bonuses and loans handed out by the island’s major banks in the run-up to the botched March bailout were on Tuesday discussed at the House Ethics Committee in the presence of bank representatives.

The committee has for months been discussing a number of issues relating to the events that led to the closure of the island’s second biggest bank, Laiki. The biggest lender, the Bank of Cyprus, only recently emerged out of Central Bank administration.

Laiki, which was relying on emergency liquidity assistance to survive, asked for a €1.8 billion state bailout in June 2012, unable to comply with obligatory recapitalisation requirements. The BoC unexpectedly asked for €500 million.

In addition to inheriting many of Laiki’s assets and obligations, including its emergency liquidity assistance, the BoC has been recapitalised using a substantial chunk of people’s uninsured deposits.

Lawmakers have been quick to condemn the banks’ risky behaviour that contributed to the botched €10 billion international bailout deal in March, even though their own parties were part of the fabric of interconnected interests that enabled many of them to take the favourable loans they yesterday said they were scandalised by.

The Ethic committee’s discussions run parallel to a number of others, including criminal investigations, but lawmakers have nonetheless claimed their own investigations might be useful to authorities.

One former Laiki member got a leaving bonus of €1.8 million, head of the committee Demetris Syllouris said citing Central Bank data. Some got annual bonuses of anything from €100,000, or even €350,000 in 2010-2012, he added.

Former Laiki CEO Christos Stylianides said he did not know who got the €1.8 million bonus, but added the only one who was getting rewards that high was Efthimios Bouloutas. Stylianides got the top job in December 2011, taking over from Bouloutas who was CEO from March 2006.

The administrator of Laiki, Andri Antoniadou, said “there was no rationale behind the way the bonuses were given”.

The Etchics Committee also discussed favourable loans given to some 25 Laiki and Bank of Cyprus top brass.

Syllouris said that one Laiki board member took out €257 million. He was referring to Platon Lanitis, whom Syllouris did not name just as he named no one else. Stylianides said the loan went out to Lanitis’ group of companies and had adequate collateral, which according to daily newspaper Politis came to €388 million.

He only referred to “specific persons” and mentioned some figures, such as the €183 million the former Bank of Cyprus chairman and property developer Theodoros Aristodemou took out. The loans taken out by companies and individuals have been discussed in the public sphere for months.

For example when Aristodemou was asked to testify before a panel investigating the economy he was asked to explain why his loan portfolio kept growing, Aristodemou said the loans were not his own but related to companies of which he was minority shareholder. Politis has already published the names of bank directors who took out loans worth anything from a thousand to millions of euros, including Lanitis and Aristodemou.

The practice of handing out loans to board members or executives and their related companies and relatives was widespread and allowed by law. But it did contravene good banking governance which is why article 1.9 of the Memorandum of Understanding agreed with Cyprus’ lenders to impose stricter governance obligations to lenders.

Cyprus has agreed to ban commercial banks and cooperative credit institutions from lending to independent board members and their connected parties and has set a threshold for lending to other board members. The sum of loans issued to directors cannot exceed 10 per cent of a credit institution’s core equity.

The House ethics committee said it would ask for data relating to politicians and known persons with non-performing loans taken out in co-ops and commercial banks with inadequate collateral, as well as for any loans that were written off.

The committee said it wanted the names of board members, journalists, politicians, mayors, board members of semi-governmental organisations, footballers and current and former ministers. The banks said they would forward the data within a fortnight.

Syllouris said the information would be for their eyes only, while MP with ruling party DISY Andreas Kyprianou said they would be forwarding any relevant data to the attorney-general.

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