Cyprus Mail
Business Cyprus

‘Last chance’ threat from bondholders

Bondholder protest earlier this year

By Elias Hazou
BONDHOLDERS who lost out on high-yield, high-risk bank securities will on Tuesday hear what the Central Bank and Bank of Cyprus have to offer in terms of an out-of-court settlement.

Their association on Monday described the upcoming meeting – to be chaired by President Anastasiades at the Palace – as the “last chance” for authorities to make things right.

At the same time association head Fivos Mavrovouniotis said that bondholders will not stand for any more procrastination or “mockery”, and gave notice of escalating protests if they are unsatisfied with what’s put in front of them.

The vast majority of bondholders cannot afford protracted litigation, which was why the association is open to settling the matter out of court, explained Mavrovouniotis.

But he warned: “If we realise that they are misleading us then we anticipate strong, forceful protests and we don’t know how far people will go because they are absolutely frustrated.”

According to the association, the state, the Central Bank and commercial banks all share part of the blame for the investors’ predicament, and should divvy up the compensation to be given to private bondholders “on a medium-term to long-term basis”.

But if an out-of-court settlement is not possible, Mavrovouniotis added, “we want to hear who it is that will compensate us should we ultimately take to the courts.”

He noted a prior Cabinet decision – which he said had the seal of approval of the Eurogroup – stating that bondholders were entitled to compensation.

“The tolerance of thousands of cheated bondholders has an expiry date, and it is tomorrow, after the meeting at the Presidential Palace,” association vice-chairman Stavros Yiallourides told reporters.

They were speaking after a meeting with the head of the Securities and Exchange Commission (CySEC).

For her part, CySEC chairperson Demetra Kalogirou said legal complications prevent the establishment of an arbitration body – a possibility discussed between the financial regulator and commercial banks prior to the March 2013 Eurogroup decisions.

According to Kalogirou, the securities sold by Bank of Cyprus and ex-Laiki were worth some €1.2bn, of which €700m were bought by private concerns and the rest by institutional investors. Around 10,000 people – most Cypriots and Greek nationals – are affected, she said.

Later on Monday Mavrovouniotis provided documentation to the police task force investigating the events leading up to the meltdown of the financial sector in 2013.

Mavrovouniotis said the material he presented confirms that banks but also individual bank executives and employees engaged in fraudulent practices, in violation of the EU’s MiFID (Markets in Financial Instruments Directive).

“For example, bank managers were instructing branches to mobilise every last employee to sell securities, which only licensed investment consultants were authorised to sell,” he said.

“At this time the police have in their hands thousands of complaints from individuals who have been swindled, as they could not realise the risks of the products they bought.”

In 2012 thousands of investors were left high and dry after the banks stopped paying interest on convertible bonds, after Bank of Cyprus and Laiki posted huge losses on their exposure to Greek debt.

Earlier CySEC had said the banks did not do due diligence on the personnel who were selling the convertibles, nor on whether investors were sophisticated enough to know what they were buying.

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