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Top CBC managers knew of Laiki’s demise, says ex-governor

Athanasios Orphanides named four top CBC officials who he said knew of Laiki's financial state

By Angelos Anastasiou

TOP managers at the Central Bank of Cyprus (CBC) should be investigated for their role in the misguided decisions that led to the island’s economic collapse in 2013, former governor Athanasios Orphanides said on Tuesday.

In a live interview for the state broadcaster from his office at the Massachusetts Institute of Technology, Orphanides, who served as CBC governor from 2007 to 2012, tried to defend his record after a Presidential Palace internal report – leaked to the New York Times – claimed he was to blame for many wrong decisions and omissions in the build-up to the crisis.

“This so-called report includes many laughable assertions and false accusations,” Orphanides hit back.

Refusing to call it a report, the ex-central banker said the Presidential Palace should position itself on whether it agrees with the content.

“If this document is, in fact, an official Presidential Palace report, then that constitutes mudslinging,” he said. “But that is incumbent on the President standing by its claims.”

Yesterday, government spokesman Nicos Christodoulides addressed the question, saying the report does not reflect the President’s views.

“There is nothing else to be said on this matter,” he told state radio. “It is an internal memo and its claims are not shared by the President.”

As he has done in the past, Orphanides pinned most of the errors and omissions to AKEL, the communist party that elected then-President Demetris Christofias, who replaced Orphanides with alleged party loyalist Panicos Demetriades in May 2012, weeks before the decision to nationalise undercapitalised Laiki Bank was made.

“The AKEL government seized control of Laiki and installed Andreas Filippou as chairman, with Panicos Demetriades already at the CBC’s helm,” said Orphanides.
“Six or eight months later, the bank was destroyed.”

The Presidential Palace report claimed that Orphanides had been responsible for initiating the practice of authorising emergency liquidity assistance (ELA) for what it claimed was an already insolvent lender.

“During my time at the CBC, the analysis we had said that Laiki had been solvent – all the evidence is at the CBC,” he said.

But, he said, ELA was illegally authorised for the failed lender after he was replaced.

“To be eligible for ELA funding, a bank must be solvent and be able to post adequate collateral,” Orphanides said.

“This way, even if the bank were to run into trouble, the CBC could just seize the collateral and cover its losses. That is how we know ELA was approved to Laiki illegally: after it failed, it was found to have less assets than required to cover its ELA obligations, which is why its ELA was dumped on the Bank of Cyprus.”

Pressed for answers on who might have illegally authorised ELA, Orphanides named names that he claimed should be investigated.

“Approving ELA requests is not one man’s job,” he said.

“I think the CBC’s senior officials at the time should be questioned by the authorities – Spyros Stavrinakis, Costas Papadopoulos, Akis Fanopoulos, Kyriacos Stavrou. There are top-level officials that ought to know which ELA disbursements were legal and when the illegality began.”

Predictably, Orphanides’ claims drew an aggressive response by AKEL.

In a statement, the opposition party accused the former governor of trying to shake off his own responsibility for the collapse of the banking system and pin it on others.

“However, unfortunately for Mr Orphanides the incongruence of his statements then and now indicates his lack of credibility,” the statement read.
“It was Mr Orphanides himself who said, in April 2012, six months after the haircut of Greek sovereign debt, that the losses caused to Cypriot banks were deemed manageable,” AKEL added.

“It was also him that said, in November 2011, one month after the haircut on Greek debt, that our banks were careful and did not assume great risk.”

“Unfortunately, his efforts to convince the public that he allegedly warned the government at the time of the risks, falls short.”

AKEL also referred to unconfirmed claims that upon departure from the CBC, Orphanides removed the hard drives from his computer, in order to avoid leaving behind incriminating evidence.

“Finally, if Mr Orphanides is confident of his assertions, he should come to Cyprus and bring with him the hard drives from his CBC computer,” said the
statement.

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