Cyprus Mail
Business Cyprus

AKEL asks German watchdog to probe Marfin

By Elias Hazou

Opposition AKEL has asked Germany’s banking watchdog to look into suspicions that former Marfin Popular Bank may have used a German lender as a go-between in a share buyback scheme whose alleged purpose was to artificially inflate the Cypriot bank’s share price.

The move is being spearheaded by AKEL deputy Irini Charalambidou, alleging a three-way tie-up between Greece’s Marfin Investment Group (MIG) – formerly the largest shareholder in Marfin (later Laiki) – Marfin Popular and the German bank.

In a letter to the head of Germany’s Federal Financial Supervisory Authority (BaFin), Charalambidou claims Marfin Popular diverted several millions in customer deposits to purchasing structured bonds issued by a German bank.

The smoking gun, according to Charalambidou, lay in that the structured bonds – a structured bonds – consisted of shares of MIG and shares of MIG-owned companies such as Ygeia and Delta Singular.

The alleged transactions took place between 2008 and 2011, the period during which MIG controlled Marfin Laiki.

Marfin Popular then came in and bought up the bonds, creating the illusion of demand for its own shares and thus artificially driving up its stock price.

Charalambidou says she has evidence pointing to Marfin as the instigator of the scheme, in that it asked the German bank to create the structured bonds.

According to the MP, the German lender – which she references in her letter but has not publicly named – acted as the facilitator or intermediary for the scheme.

Charalambidou goes on to note that the German bank in question ought at the time to have examined the “commercial logic” behind Marfin buying back what were effectively its own shares.

The decision to invest in the structured bonds allegedly rested with the then leadership of Marfin Popular.

The AKEL deputy urges German financial regulators to look into possible breach of banking regulations (price support), possible securities fraud and possible breach of disclosure obligations.

Should a subsequent investigation by the German watchdog bear out these suspicions, Charalambidou notes, the cash used by Marfin should be returned to the uninsured depositors of Laiki, currently under administration.

The same letter is also addressed to the local Securities and Exchange Commission, and communicated to the Attorney-general and the governor of the Central Bank of Cyprus.

Formerly known as Marfin Popular, insolvent Laiki was wound down in March 2013 and its good part (loans and deposits below €100,000) folded into Bank of Cyprus after the also-bankrupt state could not underwrite it.

Malinvestment at both Laiki and Bank of Cyprus is part of an ongoing criminal probe into what caused Cyprus’ economic meltdown spanning the years 2006 to 2013.

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