By Elias Hazou
THE Securities and Exchange Commission (CySEC) has slapped Bank of Cyprus and Laiki Bank, as well as senior former bank officers, with massive fines in excess of €7m in connection with their purchase of toxic Greek government bonds.
Bank of Cyprus (BoC) was fined €1,050,000 and (now-defunct) Laiki €950,000.
The administrative fines were imposed after CySEC concluded its investigation into the two banks’ purchase of Greek government bonds at a time when the bonds had undergone a series of downgrades, eventually reaching ‘junk’ rating.
The penalties also relate to the banks’ violation of reporting requirements to the stock exchange, publishing misleading and incomplete prospectuses and misreporting their assets in 2010 and 2011 up until the first write-down of Greek public debt, known as PSI.
In addition to the bank’s administrative fines, CySEC penalised a number of their officers. Among them, former Laiki strongman Andreas Vgenopoulos and former CEO Efthymios Bouloutas were each fined €705,000, and former deputy CEO Christos Stylianides was fined €430,000.
Former BoC chairman Theodoros Aristodemou and former CEO Andreas Eliades were each fined €530,000, while former Deputy Group Chief Executive Yiannis Kypri and former Executive Director Yiannis Pechlivanides were fined €330,000 each. Other directors were slapped with smaller five and six-figure fines.
CySEC’s decision drew an immediate response from a number of former BoC directors.
In a statement, the law firms of Chrysis Demetriades & Co and Christos M. Triantafyllides, representing some of the former directors, slammed the financial regulator for “bias and lack of objectivity.”
It said CySEC’s motive was to make scapegoats of the former BoC officials, playing to an angry public seeking the guilty parties for the financial meltdown.
The statement said moreover that CySEC has contradicted itself, as at “the material time the regulator raised no objections to the bank’s financial reports.”
Following the Greek sovereign debt haircut, BoC and Laiki posted mammoth losses after writing off €4.5bn from their Greek bond holdings. Both banks requested state aid, prompting Cyprus to seek financial assistance from the international lenders on June 26, 2012.
The consequent bailout agreement called for the winding down of Laiki and the restructuring of BoC, which was also lumped with Laiki’s €9bn debt to the European Central Bank in emergency liquidity assistance.
In previous findings relating to BoC alone, CySEC said that not only were investors not properly informed on the bank’s investment in Greek government bonds by January 13, 2010, but instead, they were told by Kypri on December 10, 2009, that investing in Greek government bonds was risky, and were reassured by him that the bank had sold almost all its Greek bonds.