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CBC chief warns against handing over Laiki assets to depositors

Central Bank Governor Chrystalla Georghadji

By George Psyllides

THE Central Bank (CBC) governor has warned MPs that turning over the assets of defunct Laiki Bank to its depositors and creditors could have negative effects.

Quoting a letter to parliament, news portal Stockwatch said Chrystalla Georghadji emphasised the need to avoid adverse developments that could arise from parliament’s intention to transfer Laiki’s assets to its creditors and people who lost deposits over €100,000 after the lender folded as part of the island’s bailout in March 2013.

The governor said the CBC did not disagree with the decision, but it should be done in a way that it would not prompt the reaction of supervisory authorities in the countries where Laiki had subsidiaries, which could wipe out their sale value.

Georghadji said measures included taking over the subsidiaries or the voting rights, or forced sale.
The governor said that so far foreign authorities’ concerns have been allayed because the CBC has control over the assets.

The failed lender’s main assets are the 9.6 per cent stake in Bank of Cyprus, and investments in subsidiary companies in Greece, Malta, Romania, Serbia, Ukraine and Russia.

Those companies continue their operation normally despite the inability to offer them any financial assistance, the governor said.

Depositors have demanded that they be put in charge of legacy Laiki, saying that two years after the bank was wound down, the Resolution Authority – essentially the Central Bank – has done next to nothing to recover its assets.

Uninsured deposits (over €100,000) were wiped out in the March 2013 ‘bail-in’ of depositors; any assets the Resolution Authority can recover would presumably go towards compensating Laiki’s burned savers.

Laiki had amassed some €9bn in emergency liquidity assistance (ELA), the bulk of which was green-lighted at a time many believe the bank was insolvent.

ELA is authorised by national central banks. According to the regulations, insolvent banks are not eligible for ELA.

That debt was transferred to the Bank of Cyprus, which absorbed most of Laiki’s operations.

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