Central Bank (CBC) Governor Panicos Demetriades was under duress when he signed a controversial deal to pay a company a 0.10 per cent fee on any amount needed to recapitalise the banks, including when cash was seized from depositors, reports said on Thursday.
Two newspapers, Politis and Simerini, reported that Demetriades allegedly signed the agreement under the threat that Alvarez and Marsal, contracted by the CBC to advise on the restructure of the island’s stricken banking system, would leave on March 28, the day before the banks opened after some two weeks.
The banks had closed to prevent a bank run following a Eurogroup decision to seize deposits, or bail-in depositors, to recapitalise the lenders.
According to a document prepared by external lawyers of the CBC, A&M are seeking a “recapitalisation fee” of €4.75 million as a payment.
On Wednesday, the CBC said payment of the fee was not justified.
A spokesperson for A&M declined comment on the matter when asked by Reuters.
A legal report compiled by CBC legal consultant Alecos Evangelou says A&M agreed with Demetriades a fee of 10 basis points ‘of the total gross capital benefit into the banking system’.
An attached letter to the lawyers’ report, purported to be from Alvarez and Marsal to Demetriades, makes such a reference. Demetriades has not publicly specified the terms of the arrangement.
The fee would be payable on October 31.
Former CBC deputy governor Spyros Stavrinakis told web-based news outlet Sigmalive on Wednesday that the success fee had been agreed after A&M proposed finding the money necessary to recapitalise the banks in a bid to avoid the haircut on deposits.
This was after the first Eurogroup, on March 15, when it was decided to impose a haircut on all deposits, in all banks, to raise €5.8 billion, Stavrinakis said.
“Since they did not succeed in securing the capital and none of their efforts yielded a result, why are they asking for the fee,” Stavrinakis was quoted as saying.