By Elias Hazou
FBME Limited, the holding company of FBME Bank, has alleged that the Central Bank of Cyprus (CBC) is now trying to rescind the licence of the bank’s Cyprus branch after failing to find buyers for it.
“Information has come to FBME Limited that the Republic of Cyprus at the arbitral tribunal at the ICC [International Chamber of Commerce] in Paris, are seeking to have the Cyprus branch of FBME Bank closed on the grounds that no buyers for the branch have been found,” the bank’s owners said in a statement.
“In other words, because the resolution measure foisted on the branch by the CBC last July hasn’t worked they want to withdraw the FBME licence. They add that they have to do this now because closure would trigger the deposit protection insurance and that the FBME funds held by the CBC are at a level (€158 million) that will enable them to make these insurance payments.
“What they appear to be really saying is that due to the CBC’s own incompetence last July they feel justified in creating further damage to FBME and its clients now. They were told on many occasions last year that the resolution decree was inappropriate and probably illegal as applied to FBME Bank, but they now want to end this episode by destroying the branch.”
The statement also said the CBC is mistaken if it believes it can use FBME depositors’ money for deposit protection insurance.
According to FBME’s owners, the deposit protection scheme is a mutual instrument funded by banks (including FBME) and designed to protect depositors.
“FBME has paid promptly and in full its annual contributions since the inception of the scheme in 2004, as should have all institutions both domestic and foreign in Cyprus. By definition the deposit protection scheme is triggered when a bank fails and is not funded by the assets of the failed bank.
“FBME has neither failed nor is it in danger of doing so. FBME has deposits of over €1.5 billion, of which the CBC currently holds €158 million. The branch is 103.5 per cent liquid, meaning it can pay back all its depositors without trouble so there is no need to trigger the deposit protection scheme.”
The statement went on to suggest that the CBC, currently in turmoil, was looking to wrap up the FBME case in a hurry.
The CBC took over the Tanzania-based bank’s management last year, placed its operations under resolution and embarked on finding a buyer after the US Department of the Treasury named FBME as “a financial institution of primary money laundering concern”.
To this day, the FBME shareholders deny the allegations and have resorted to the arbitration court to have the liquidation and resolution orders lifted.
Last month the CBC and its appointed administrator for FBME were instructed by the ICC Arbitral Tribunal to back off from any attempt to sell the bank to any other Cypriot or other lender.
Dinos Christofides, the special administrator in charge of running the bank’s day-to-day operations, declined to comment on the substance of the FBME statement while the court processes – here and abroad – are ongoing.
But he did say that, under the relevant legislation governing the resolution of financial institutions, a bank may be wound down even if it is not bankrupt or illiquid – for example if a lender is blacklisted due to suspected malfeasance.
The malfeasance does not have to be proved in a court of law before a national central bank places a lender in its jurisdiction under resolution, Christofides said.
In this case, he added, the CBC acted to protect the bank’s depositors because, in the wake of the US Treasury Department’s announcement, foreign lenders stopped transacting with FBME.