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Cyprus

Quizzed by MPs, Georghadji stays mum

Central Bank Governor Chrystalla Georghadji

MPs appeared dissatisfied on Tuesday with the Central Bank (CBC) governor’s responses concerning the supervisor’s actions as a result of a probe into the collapse of the island’s banking system.

The report of the House Ethics Committee probe into the economic collapse was discussed behind closed doors on Tuesday.

Citing confidentiality and the fact that several cases connected to the matter were in court, CBC Governor Chrystalla Georghadji declined to provide the detailed responses MPs wanted.

The governor warned deputies that public statements concerning ongoing court cases could hurt the cases.

“We expected to see that the CBC had done its own investigation into some of the matters,” committee chairman Nicos Nicolaides said. “It was not possible today to form a full and objective picture.”

The argument put forward by the governor was that because of ongoing legal procedures where “CBC executives would be called to testify as experts, it wasn’t allowed to make any reference to them.”

The report, issued in May 2014, said that acting in a methodical, systematic and criminal manner, the management and the officials of the now defunct Laiki bank led the lender, and, at the same time, the Cypriot economy to collapse.

The Committee concluded there had been a strategy of unloading debt onto Cyprus through Laiki’s Greek operations, forcing the bank to increase its exposure to Emergency Liquidity Assistance (ELA) and possibly transferring it to Greece to cover interbank lending there.

“This however, in the view of the committee, in combination with the loss of deposits, was the main reason for the continuous increase of ELA that brought about the dramatic effects and the collapse of the banking sector in Cyprus,” the report said.

The report, spanning some 440 pages, 1,200 with the annexes, covered an 18-month investigation.

The committee said tapping ELA was done without restraint and without considering the negative effects for the economy.

By March 28, Laiki had borrowed €9.1bn in ELA, more than half the country’s GDP.

Ruling DISY MP Andreas Kyprianou said the CBC had used the report to improve its own procedures and corporate governance.

Georghadji also told MPs that it was fully cooperating with the attorney-general on the ongoing investigations.

Kyprianou said he agreed with the CBC governor in that she could not talk in detail about cases pending in court.

“What interests us is the result and not the procedure,” he said. “If the outcome is no the one expected by society and the people, that is the conviction of the guilty parties, then we will judge them at the appropriate time.”

 

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