THE Securities and Exchange Commission (CySEC) has fined the Bank of Cyprus (BoC) and some of its former board members for failing to inform shareholders of the bank’s real recapitalisation needs.
Banks are legally obliged to inform their shareholders of any confidential information that directly impacts the banks, ensuring that the data is available online for at least five years, according to CySEC rules.
The BoC told shareholders in its annual general meeting (AGM) in June 2012 that it needed to cover – through private funds – a shortfall of €200m to comply with regulatory capital requirements.
But soon afterwards, on June 27 last year, the bank requested €500m in state assistance after failing to raise the necessary capital to meet a regulatory shortfall because of increased provisions and its exposure to Greek bonds.
CySEC said BoC needs had doubled to about €400m, which should have been announced on June 15.
The AGM was held on June 19, and shareholders would have had until June 15 to submit any questions in writing prior to the AGM.
CySEC slapped a €70,000 fine to the bank as an entity for failing to inform its investors when it should have. It also imposed a €60,000 fine on former CEO, Andreas Eliades; €60,000 on former chairman Theodoros Aristodemou; €50,000 on former deputy CEO Yiannis Kypri; and €50,000 on former first deputy CEO Yiannis Pechlivanides. All of them were directly responsible and negligent of their duties, CySEC said.
Aristodemou issued a statement yesterday expressing his surprise in the CySEC decision to fine him, as he claims that at the time of the first decision the bank’s needs had increased from €200m to €400m and it was not until June 26 that the need for €500m in fresh capital wasdetermined.
Earlier this year, the BoC seized a substantial chunk of its uninsured deposits to recapitalise itself, as part of an international bailout for Cyprus. The BoC posted a net loss of €1.8 billion for the first half of the year, impacted by the forced disposal of its Greek operations this March as part of the bailout. The BoC was also forced to absorb some of the assets of the now-defunct Laiki bank following an EU decision to shut Laiki down.