A FEW DAYS ago there was a big row at the House watchdog committee, after Finance minister Harris Georgiades pointed out that the bail-in of depositors had been included in the draft bill for the resolution of credit organisations that was prepared at the end of 2012. Demetris Christofias was president at the time, even though he had always insisted that the issue of re-capitalising the banks through the bail-in of shareholders and depositors had never been discussed during his presidency.
The finance minister at the time, Vasos Shiarly, had always maintained that the possibility of a bail-in had never been raised at any Eurogroup meetings while he was minister. Funnily enough, the resolution bill had been sent to the ECB for approval with a cover letter, dated January 11, 2013 and signed by Shiarly. It included a provision for the bailing-in of all deposits, which the ECB suggested in its response on February 1, 2013 (when Christofias was still president) should be amended to exclude deposits of up to €100,000 in line with EU policy.
Had Shiarly not seen the response either or did he think the ECB wanted the bail-in provision in the bill for cosmetic purposes? The then governor of the Central Bank, Panicos Demetriades also insisted he had no knowledge that the hair-cut of deposits was on the cards, until the Eurogroup took the decision in March 2013. The central bank he was the governor of had included the bail-in provision in the resolution bill it had drafted but Demetriades never realised, it seems, that a Cypriot law could apply to the Cypriot banks.
This refusal to take responsibility is not surprising as it was Akel’s style of government, everyone following the example set by the president; it was leadership by example. Christofias also felt obliged to speak about the issue on Thursday, saying there was no provision for a haircut of deposits in the memorandum his government had agreed in November 2012. This was true and had he agreed to a memorandum earlier, instead of dragging his feet for months, the bail-in might not have been necessary.
Akel’s deputies were incensed by the minister’s revelations urging the chair of the committee to stop Georgiades talking about the matter. But they should have carried on talking about it because it highlighted the habit of senior officials to suppress unpleasant news, until it is too late to do anything about it. The Christofias government did the same in the case of Laiki, wasting €1.8bn on propping it up after it was clear that it would not avoid bankruptcy. And the deputies approved the expenditure, without bothering reading the relevant bill; they also avoided reading the resolution bill which included the provision about the bail-in.
Perhaps everyone is telling the truth when they claim they were never aware of the possibility of the bail-in, but in such case they are culpable for not bothering to read such important legislation.