Cyprus Mail

Dodgy loan probe hampered by foot-dragging banks

The HQ of the Co-operative Central Bank

By Elias Hazou

TWO MAJOR banking groups – Bank of Cyprus (BoC) and the Cooperative Central Bank (CCB) – are reportedly paying no heed to instructions from law enforcement to supply information on dodgy loans given to former bank executives and major shareholders.

It has been months since a police task force – probing the circumstances leading up to the meltdown of the financial sector last year – has ordered the two banking groups to furnish the data, writes daily Politis.

BoC and the CCB have so far failed to comply, citing various reasons. The data requested by police concerns loans granted in the past years to former bank executives, senior managers, members of the board of directors and major shareholders.

Police investigators want the information so as to substantiate suspicions that some loans were granted without adequate collateral, which in some cases may constitute a criminal offence – such as in the event a borrower declared a false value for his or her collateral in order to secure a loan.

It is presumably this procrastination by the banks which last week prompted Attorney-general Costas Clerides to warn of sanctions in the event they continue to be uncooperative.

Under the law concerning collateral offences, persons are obliged to provide any documentation to a criminal investigator when so requested. If they do not, they are liable to up to three years imprisonment and/or a fine.

The Mail has confirmed that the police task force has sent due notices to BoC and the CCB, but they have yet to comply.

Responding to the Politis report, the CCB flatly denied allegations it is not working with police.

In a statement on Monday, the CCB said it received a notice from the task force requesting the loan information on July 28. On August 4, CCB general manager Marios Clerides responded to the police, saying the CCB could not oblige.

The reason: the CCB does have the data requested, but wants a written authorisation, from the police team, authorising the latter to investigate the loans in question.

The CCB said it needed this authorisation in order to “avoid any possible legal complications arising in relation to the persons under investigation”.

Without the authorisation, the CCB was unable to comply, it said.

Legal sources described the CCB’s peculiar request as “vacuous”, as it is devoid of any legal standing.

“Once anyone gets a notice from police to hand over information, that’s it, nothing more is needed. The penal code is explicit on this, and moreover provides for criminal liability,” the sources said.

The Cyprus Mail understands that the attorney-general’s office has since pointed this out to the CCB, but they are still not cooperating.

The same sources surmised it was a delaying ploy on the part of the CCB.

In its statement, the CCB went on to say that it was the only banking group which provided the House watchdog committee, in December 2013, with all the data relating to loans and credit facilities to CCB officials.

Dodgy loans to bank cadres, and loans with preferential interest, are part of the scope of the police probe that covers Cypriot lenders’ expansion into Greece, corporate governance, purchase of junk Greek bonds, as well as the circumstances of how now-defunct Laiki Bank came to amass some €9bn in emergency liquidity, a liability since passed onto BoC.

AG Costas Clerides has said meanwhile that detectives last week obtained “significant data” from Greek financial authorities. Investigators would soon be making another trip to Greece, he said.

Last week the President spoke of possible arrests by the end of the year, in connection with the collapse of the economy, and pledged that his government will show zero tolerance to cover-ups.

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