Cyprus Mail

CBC Governor Panicos Demetriades resigns

Pancios Demetriades

By George Psyllides

CENTRAL BANK Governor Panicos Demetriades resigned on Monday after two turbulent years in office, which also saw the launch of an investigation into his dealings with a consultancy firm.

An official statement said Demetriades’ resignation has been accepted by President Nicos Anastasiades.

Reports suggested that he will be replaced by Auditor-general Chrystalla Georghadji, a highly respected technocrat, but there was no official confirmation on Monday night.

Demetriades handed his resignation to Finance Minister Harris Georgiades in Brussels on Monday, in the presence of a European Central Bank (ECB) representative.

Both Cypriot officials were in Brussels for a Eurogroup meeting.

The reason for his resignation was not immediately clear, but he has had testy relations with the current administration and Anastasiades had said late last year that he was seeking his removal.

Quoting a source who saw the letter, Reuters said Demetriades citing “family and personal” reasons for his departure, and “difficulty in cooperating with the Board of Directors” at the Central Bank.

The Cyprus Mail has learned that the two sides had come to an agreement and Demetriades will be receiving a payout of around €250,000.

The outgoing CBC chief had asked for over one million euros last year. The government had offered €400,000.

Meanwhile, Attorney-general Costas Clerides said he was not planning to prosecute Demetriades in connection with Alvares & Marsal, a consultancy firm hired to assist the CBC.

Clerides stressed that no deal had been made to drop the case in exchange for the resignation

The attorney-general was quoted by Sigmalive as saying said that his decision had been made after considering the facts of the case.

Demetriades has been in his post for almost two years, after being appointed by the previous administration.

Tension between him and the president simmered for months, as Anastasiades sharply criticised his handling of the island’s international bailout last March.

The ECB had issued warnings to the Cypriot authorities not to interfere in Demetriades’ work, but locally the Central Bank chief was the subject of much criticism for being slow in restructuring the banking sector.

On Monday, the ECB said it took note of the resignation.

“The ECB takes note of the resignation of Panicos Demetriades who has been the governor of the Central Bank of Cyprus through very difficult times and played an important role in the implementation of the adjustment programme,” an ECB spokesman said. “We count on a fruitful cooperation with his successor.”

Demetriades has maintained that when he took over in May 2012, less than a year before the bailout, he assumed a poorly regulated banking system which had been taking excessive risks.

One of the main criticisms directed against Demetriades has been how, under his watch, the now defunct Laiki Bank accumulated around €9.5 billion in emergency liquidity aid, only to buckle and fail when the ECB threatened to pull assistance.

“How much independence can a central banker have when, from his statements, it appears he was serving other expediencies instead of his country’s interest,” Anastasiades said last year.

For the state to get its €10 billion in bailout funds last March, the president said, it was told to privatise state companies, seize deposits, make painful cuts, and raise taxes.

“Can you tell me how someone persuaded the ECB so that an insolvent bank was given €9.5 billion [in ELA] without all these commitments?” Anastasiades said, suggesting that Demetriades was responsible.

The president also said how Demetriades in the past had said that Laiki had been kept on a ventilator until February’s (2013) presidential elections.

Demetriades has also been the focus of a police investigation into the agreement he had struck with Alvarez & Marsal.

The investigation was launched in late October following media reports that Demetriades had agreed to pay A&M a 0.10 per cent fee on any amount needed to recapitalise the banks, including when cash was seized from depositors.

The deal was allegedly signed after the Eurogroup decided to seize depositors’ cash to recapitalise banks.

An internal CBC audit, leaked to the media late last year, concluded among others, 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 the consultancy a “success fee” after the fact, and awarded jobs to one company without a tender procedure.

According to Demetriades’ contract, a month’s notice is required, and for that reason his resignation will be effective as of April 10.

During this period, he will deal with the pending issues before him and will brief his successor.




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