Cyprus Mail
Cyprus

Central bankers ‘surprised’ by BoC capital shortfall

Spyros Stavrinakis

By Angelos Anastasiou

FORMER Central Bank governor Panicos Demetriades and then-senior director Spyros Stavrinakis were surprised by a letter received in June 2012 from the Bank of Cyprus CEO at the time, Andreas Eliades, which revealed the lender’s need for a capital injection with government funds, Central Bank staff Argyro Prokopiou testified in court on Friday.

Prokopiou took the stand as a prosecution witness in the trial of five former BoC officials, as well as the bank itself, who are facing charges of market manipulation and misleading investors.

During questioning, the witness read out the letter, along with the hand-scribbled notes made by Stavrinakis on the margins.

In them, the CBC’s senior director instructed Prokopiou to draft a letter of response, reinstating the “true events” that were falsely presented in Eliades’ letter.

Stavrinakis informed Prokopiou that Demetriades had had three meetings with the BoC’s top brass in the few days before the letter was received, and that the general impression he had gotten was that the bank would be sufficiently capitalised by the end-of-June deadline set by the European Banking Authority (EBA) through the sale of Eurolife, the group’s insurance arm.

“The contents of the letter are a surprise, at least for the Governor and myself,” Stavrinakis noted on the letter.

Prokopiou further told of an internal memo she sent to Stavrinakis on June 24, 2012, by which she informed him that the bank had been unable to sell Eurolife, despite some interest by potential buyers. But even if the sale had gone through, it would still not have addressed the bank’s undercapitalisation issue, she told Stavrinakis, because its capital needs by March 2012 had been established at €317m, whereas the sale would have procured around €200m.

The BoC had suffered additional writedowns on its capital due to changes in its employees’ provident fund, as well as losses linked to its holdings in Greek debt, the memo said.

The note also said that the EBA was unwilling to grant an extension for recapitalisation to undercapitalised banks, unless the effort was fully underwritten by the government.

A separate letter by Demetriades to the Bank of Cyprus, sent on June 26, 2012, suggested that it would not be feasible to recapitalise the bank adequately before the EBA’s deadline expired, four days later, especially in light of information that an increase of its capital shortfall could be imminent.

Responding to another question, Prokopiou said that Bank of Cyprus data, submitted to the Central Bank in August 2012, showed that its capital shortfall had spiked to €730m by June.

Related posts

All regulations are followed at Zenobia wreck, diving companies insist

Annette Chrysostomou

Four remanded after wild car chase in Paphos

Staff Reporter

Bringing our art the long road home

Lizzy Ioannidou

Hapless thieves throw away €2,000 still inside bag they snatched (Updated)

Staff Reporter

Flooded roads in Larnaca reopened, rains abate (Updated)

Staff Reporter

JRCC trains foreign officers in search and rescue techniques

Source: Cyprus News Agency

15 comments

Comments are closed.