By Elias Hazou
MPS ON Monday tabled a legislative proposal empowering the depositors-creditors of now-defunct Laiki Bank to name a special administrator in replacement of the administrator appointed by the Central Bank.
Lawmakers were told by government and banking officials that, under an EU directive, only the Central Bank, in its capacity as the resolution authority for lenders, may appoint the administrator.
But this was only part of the story, said DIKO MP Nicholas Papadopoulos.
“What they left out, and what was subsequently revealed to us by the chairwoman of the Securities and Exchange Commission, is that the same directive stipulates that the bank’s restructuring must be completed within a year at the latest.”
It has been two-and-a-half years since Laiki was placed under administration, therefore Cyprus is already in breach of the EU directive, added Papadopoulos.
This left the Republic open to civil lawsuits for non-compliance, he added.
MPs also tabled a second bill, which allows bank depositors who suffered a ‘haircut’ to participate in the bank’s board of directors. This would apply, for instance, to Bank of Cyprus.
“It is unreasonable that people who put up €4bn to recapitalise Bank of Cyprus should not be represented, while others who invested €400m are able to control the entire board,” Papadopoulos argued.
Legacy Laiki’s depositors say that, more than two years after the lender was wound down, the Resolution Authority – essentially the Central Bank – has done next to nothing to recover the bank’s assets.
Uninsured deposits (€100,000 and over) were wiped out in the March 2013 ‘bail-in’; any assets the Resolution Authority can recover would presumably go towards compensating Laiki’s burned savers.
Meanwhile Bank of Cyprus’ uninsured depositors were subjected to a 47.5 per cent haircut in exchange for equity (bank shares).