Cyprus Mail

FBME owners appeal for arbitration

By Elias Hazou

SHAREHOLDERS of FBME Bank in Cyprus are turning to international arbitration aimed to halt the sale of the lender by the Central Bank here.

In an announcement yesterday, the shareholders said they have filed a request for arbitration with the Arbitral Tribunal of the International Chamber of Commerce.

This was done to counter the unilateral decision of the Central Bank of Cyprus (CBC) to sell FBME Bank’s Cyprus branch, “which the owners regard as a hostile takeover.”

The arbitration invokes the Lebanese-Cyprus Convention on the reciprocal promotion and protection of investment. Article 6 of the convention prohibits any nationalisation or expropriation of the assets of the citizens of either country.

The shareholders “are seeking a resolution of the actions of the Central Bank of Cyprus and its Special Administrator in line with internationally recognised bi-lateral treaties.”

According to the announcement, measures for the sale of the Cyprus branch of FBME Bank “clearly come as an obvious and unjustified infringement of this convention.”

It added: “These measures were issued under the Special Resolution Decree (of the CBC) which was designed for insolvent banks or those facing serious liquidity problems, not a healthy financial institution such as FBME Bank, where the financial position is sound and fully in line with capital adequacy and solvency requirements of the European Central Bank.”

Calling the decree “hasty and ill-judged,” FBME Limited, the holding company for FBME Bank, said it was issued in the wake of the US Treasury Department’s notice in mid-July.

The US Treasury said FBME Bank had been deemed a “primary money laundering concern,” and gave the bank a period of 60 days to respond to the allegations.

Following the US Treasury’s announcement, the CBC placed FBME under administration and temporarily suspended its operations. Transactions have since been allowed, but each requires the approval of the special administrator.

“The actions by the Cyprus authorities to take over and sell the Cyprus branch of FBME seem designed to prevent the investigation being completed or the bank having the chance to answer the allegations,” the holding company said.

“The stated intention was to protect depositors, but the decision of the special administrator appointed by the Central Bank to effectively freeze all transactions has not worked to help depositors in any way. Many of these are reportedly facing significant hardship and damage to their businesses.”

The claim that the bank does not have correspondent banking relationships is false, its shareholders said.

FBME, meanwhile, has called in specialist forensic accountants from the US offices of Ernst and Young to initiate an investigation into the bank’s anti-money laundering policies and procedures.

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