By George Psyllides
The Central Bank (CBC) has handed parliament the contracts signed with two international firms that provided various services before and after Cyprus secured an international bailout so they can be scutinised, it emerged on Tuesday.
Of particular interest is the contract signed with Alvarez & Marsal, which sparked controversy recently and put the spotlight on the embattled CBC Governor Panicos Demetriades.
The other contract concerns PIMCO, a company hired to carry out a due diligence in bank portfolios for recapitalisation purposes.
The A&M contract caused uproar last week after it emerged that it contained a provision for a success fee linked to the banks’ recapitalisation.
“First, we want to know whether it is usual practice to sign contracts with success fees, particularly the Central Bank,” House Ethics Committee chairman Demetris Syllouris said.
MPs also want to know what the hiring procedure was and which other companies were given contracts by the CBC in the past.
“What we want to know is the total amount we paid various consultants in the past one or two years to help us destroy ourselves,” Syllouris said.
When the story broke last week, it appeared that Demetriades had agreed to pay A&M a success or recapitalisation fee of 0.10 per cent on the amount the banks used to recapitalise, including cash seized from depositors.
A&M was contracted by the CBC to advise on the restructure of the island’s stricken banking system.
CBC documents showed that A&M had even settled on €4.75 million instead of €11 million.
The regulator said A&M was not entitled to a success fee since the recap amount came from seized deposits and not as part of a bailout.
A&M said it did not seek a fee based on the haircut and insisted it was legally entitled to the €4.75 million, which were, after all, inside the range proposed by Demetriades.
The governor claimed he signed the agreement under duress – A&M had threatened to leave at a critical junction for the island’s banking system.
A source later said Demetriades personally had made A&M a counter-offer of €1.8 million although it was not clear when this had taken place.
The €1.8m proposal, sources said, corresponded to 0.10 per cent of the combined €1.8bn needed for recapitalising the co-operatives (€1.5bn) plus the estimated €300m that Hellenic Bank needs in new capital. Unlike Laiki and Bank of Cyprus, which were bailed-in, the co-operatives were bailed out.