Cyprus Mail

Attempt to keep Legacy Laiki away from European Commission

By Angelos Anastasiou

As Legacy Laiki Special Administrator Chris Pavlou’s six-month appointment expired at midnight Monday, an amendment to the resolution law was tabled at Monday’s session of the House finance committee, transferring the right to appoint a special administrator from the Central Bank to its creditors.

According to a Cyprus Mail source, in light of the expiry of Pavlou’s six-month appointment on Tuesday, the resolution authority – comprising the Central Bank’s board of directors – has asked Pavlou to stay on until the end of the year, at which point the administration of Legacy Laiki’s assets will be transferred to the European Commission’s Single Resolution Mechanism (SRM).

Pavlou was unlikely to accept, the source said, but the special administrator himself declined to comment.

Meanwhile, an amendment to the resolution law was introduced on Monday, at the House finance committee which would prevent the administration of Laiki being transferred to the SRM.

The amendment followed principles similar to an earlier one, co-sponsored by DIKO leader Nicolas Papadopoulos, DISY leader Averof Neophytou, the Greens’ leader Yiorgos Perdikis, and EDEK’s Nicos Nicolaides last June, which would allow the creditors of a bank under resolution for at least a year to call a general meeting and appoint their own administrator.

The old amendment presented challenges in that, if passed, its provisions would apply to the intended beneficiaries, Laiki Bank’s (also known as Cyprus Popular Bank) creditors, but also the creditors of FBME Bank – also under resolution for more than a year, since July 2014 – alike, meaning the depositors and shareholders of FBME would also be allowed to elect their own administrator.

Stepping around the threat, the new draft’s clauses are specific to Legacy Laiki, raising questions of constitutionality on grounds of preferential treatment among legal circles.

“Irrespective of the provisions of articles 14 and 15 of the resolution law with regard to the appointment of a special administrator to oversee the resolution of Cyprus Popular Bank Public Co Ltd, the creditors of Cyprus Popular Bank Public Co Ltd may call a general meeting of the creditors of Cyprus Popular Bank Public Co Ltd,” the draft bill read.

In addition, the amendment stipulates that as soon as a general meeting is called by a court, Legacy Laiki’s status as being “under resolution” is lifted, meaning it would no longer be subject to direct administration by the SRM.

“As of the date a court rules for a general meeting [of creditors] to convene, Cyprus Popular Bank Co Ltd is considered as no longer being under resolution on the basis of resolution law,” the draft amendment said.

And this despite the fact that, for all intents and purposes, Legacy Laiki would remain under resolution until a new special administrator has been appointed and formally assumed duties.

“Until full implementation of the general meeting’s decisions with regard to Cyprus Popular Bank Public Co Ltd and any assets thereof, […] the provisions of the resolution law will be adhered to as if Cyprus Popular Bank Public Co Ltd were under resolution,” it said.

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