Cyprus Mail

Watchdog under fire over ‘golden boy’ fines

CySEC boss Demetra Kalogirou

By George Psyllides

THE Securities and Exchange Commission (CySEC) found itself in the line of fire yesterday, following Thursday’s announcement of hefty fines on banks and former executives in connection with the acquisition of toxic Greek government bonds (GGBs), which caused heavy losses.

The main argument against the regulator, which slapped banks and executives with more than €7m in fines, was that prospectuses concerning the acquisition of GGBs had been approved by CySEC before they were published.

Lawyer Chris Triantafyllides said the offending document, which prompted the fine, could not have been published without CySEC’s permission.

“If CySEC had not approved this document, the charge our clients would be facing would be different; it would have been for publishing this document without CySEC’s approval,” Triantafyllides, who represents various former Bank of Cyprus (BoC) officials, said.

The fines were imposed after CySEC concluded its investigation into the two banks’ – ex-Laiki and BoC — purchase of Greek government bonds at a time when the bonds had undergone a series of downgrades, eventually reaching ‘junk’ rating.

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 saddled with Laiki’s €9bn debt to the European Central Bank in emergency liquidity assistance.

The penalties 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.

CySEC said yesterday that the views expressed by those affected “were already known and had been taken into consideration when the administrative sanctions were imposed.”

The regulator stressed that they could appeal the fines in court and that it did not wish to get involved in a public debate on the issue.

Earlier, CySEC boss Demetra Kalogirou said the responsibility for the information contained in the prospectus burdened the banks.

“This is the responsibility of those who sign,” she told the state broadcaster.

She was echoed by former CySEC chairman Giorgos Charalambous who said the regulator could not know when banks withheld information.

“Let me remind you that the BoC board claimed that it acted in accordance with the corporate governance code and at the same time a letter sent by the central bank in March 2010 about the risks in the acquisition of bonds was withheld by (former CEO Andreas) Eliades and (senior executive Nicolas) Karydas and the people of the board found out a long time later,” Charalambous told Stockwatch news portal.

“The board did not even know, how would CySEC know?”

Eliades was slapped with a €530,000 fine.

Former Laiki strongman Andreas Vgenopoulos, himself receiving a €705,000 fine, described the decision as the “result of prejudice, animosity and lack of respect to the basic principles of objectivity and justice.”

Vgenopoulos said the fines will be annulled by the Supreme Court or the relevant European courts, adding that he was looking into launching a suit against Kalogirou in Greece.

Vgenopoulos said Kalogirou’s actions could only be interpreted “as supportive of the (Demetris Christofias) communist government which appointed her, to create impressions against the ‘bad’ bankers and shift attention from her responsibilities.”

SYKALA, the association of Laiki savers, asked for the €1,050,000 fine imposed on Laiki to be scrapped.
The company is currently in administration and any fine would ultimately mean more losses for savers, SYKALA said.

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