Cyprus Mail

AKEL warns FBME dispute could cost taxpayers dearly (Updated)

Main opposition AKEL on Tuesday warned that taxpayers could foot the bill unless the government rethinks its policy toward the Federal Bank of the Middle East (FBME).

In a written statement, AKEL MP Aristos Damianou said any moneys potentially awarded as compensation to FBME, as a result of errors committed by the republic, would inevitably have to be taken away from public coffers and Cypriot citizens.

“At a time when financial distress is afflicting the majority of the people, such an undesirable outcome would deal a severe blow to the prospects of public finances improving and would throw the Cypriot economy into new misadventures,” the statement read.

Damianou said his party had long wanted to discuss in parliament the handling of FBME, but was thwarted by Attorney-general Costas Clerides.

Earlier this year, the House ethics committee was twice scheduled to discuss the issue, but refrained from doing so after being advised by Clerides, who said it would be against the public interest and would cause problems to ongoing legal procedures.

“What has transpired in the meantime, as well as the most recent developments, has unfortunately confirmed our concerns,” Damianou added.

He was referring to a warning a day earlier from former Attorney-general Alecos Markides, who said Cyprus could pay a “huge sum” in compensation to FBME as the Central Bank has failed to act as an independent institution.

In an open letter to the president, Markides, on behalf of FBME bank owners Ayoub-Farid Michel Saab and Fadi Michel Saab, said the republic was at risk over “mishandling” the FBME case.

Stressing that FBME has obtained a series of legal victories in overseas courts, Markides said it would be the state that would be left liable and exposed and not the Central Bank (CBC) as an independent institution.

The CBC took over the Cyprus branch of the Tanzania-based bank 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 date, FBME shareholders deny the allegations and have resorted to the arbitration court to have the liquidation and resolution orders lifted.

Meanwhile four parties – DISY, DIKO, EDEK and the Greens – have co-sponsored a bill that is to be tabled to the House plenum this Thursday.

The proposal, which would impact FBME, aims to amend current legislation governing liquidation procedures for banks placed under resolution.

Under the bill, the creditors of a bank in resolution would be allowed to convene a general meeting to appoint an administrator replacing the special administrator appointed by the republic’s Resolution Authority – essentially the Central Bank.

The bank would be allowed to do so one year after the Resolution Authority has appointed the special administrator.

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