Cyprus Mail

CBC board member suing the governor

Panicos Demetriades

By George Psyllides

A CENTRAL Bank (CBC) board-member is suing the governor over comments he made following publication of the damning findings of an internal investigation into his relationship with consultants Alvarez & Marsal (A&M)

Nicos Constantinou, who headed the audit committee’s probe, said he has filed a libel suit against Panicos Demetriades over his suggestion that his recent reappointment to the board was linked with the report.

The report said A&M, with Demetriades’ approval, and apparently without prior authorisation from the board, ended up handling most of the aspects relating to the restructure of the island’s banking sector.

A key finding of the audit relates to a deal between Demetriades and A&M, whereby the latter would be awarded a “success fee”. The wording was subsequently changed to “recapitalisation fee” encompassing the possibility of a haircut of deposits to recapitalise Laiki and BoC.

And this after it had been decided that deposits would be seized.

A&M were also awarded the contract to negotiate the sale of Cypriot bank branches to Greece’s Piraeus Bank.

According to the report, the arrangement points to a “huge” conflict of interest: “The lower the sale price, the higher the haircut and the recapitalisation fee claimed by the company.”

The probe concluded, among other things, that Demetriades had withheld information and agreements signed with A&M, misled the CBC board, committed millions that were not budgeted, and without the approval of the board signed an agreement to pay a success fee after the fact, and awarded jobs to one company without a tender procedure.

Demetriades said the CBC audit committee conducted the probe without prior authorisation from the regulator’s board of directors, that he was never informed of the audit, that he was never asked by the auditors for his side of the story, and that therefore the report’s conclusions are “arbitrary and wrong”.

“It’s worth noting that the drafting of the aforementioned report was followed by Mr Constantinou’s reappointment by the Cabinet to the board of the Central Bank of Cyprus,” the governor said.

Constantinou was first appointed five years ago by the Demetris Christofias administration, which also appointed Demetriades.

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