Cyprus Mail

FBME says staff reduction costly, makes liquidation impossible

FBME Bank, the Tanzanian lender which had its licence revoked by the Central Bank of Cyprus and was shut out of the US banking system after being accused of or fined for money laundering, said that the recent staff reduction makes liquidation of its branch impossible and may prove costly to the taxpayer, its staff and depositors.

The lender which was commenting in an emailed statement, a week after the special administration appointed by the Central Bank of Cyprus terminated the employment of 136 FBME workers, said that following the licence revocation in December, it can no longer provide basic services to its customers including issuing statements of their accounts.

“The special administrator seeks to write to all depositors asking them to confirm their current deposits at the Cyprus branch of FBME,” the bank said. “Since the branch licence was revoked by the Central Bank of Cyprus, banking operations have ceased and as a consequence balance information in the systems cannot lawfully be updated and statements have not been issued. Effectively, the proposed plan involved knowingly providing inaccurate information to depositors and asking them to confirm the same as accurate”.

The implementation of the administrator’s plan will constitute fraud on the bank’s depositors, FBME said.

“These actions by the Central Bank of Cyprus are a transparent attempt to achieve by illegal means the ends that they have been unable to achieve in the courts,” FBME said.

The owners of the bank have resorted to international arbitration seeking compensation of up to €500m for damages suffered as a result of the central bank’s decision to place its Cyprus branch under administration in July 2014 and subsequently seek its liquidation. The central bank imposed a €1.2m fine on FBME citing irregularities in its anti-money laundering practices.

“The motivation is to prevent FBME asserting its legal rights in the US and in Cyprus,” FBME said. “This action is as misguided as it is unlawful; it will create a massive liability for the CBoC to depositors of FBME Bank Limited worldwide and it increases the liability of the Republic of Cyprus to the owners of FBME”.

The bank said that since its capital reserves exceed by $162m the funds available to cover the bank’s deposits, the decision to reduce its staffing levels to a skeleton staff to save costs, as cited by the administrator, will not benefit depositors.

“To the contrary, the ability of the bank to conserve its assets is adversely impacted because of the loss of staff,” FBME said. “This action is arbitrary and has been taken contrary to law; the special administrator is not the employer of staff at FBME and he does not have the power to terminate employment contracts. This illegality is compounded by a refusal to pay the staff their lawful dues”.

The reduced staffing level makes also the liquidation process “no longer possible,” FBME said.

The central bank was unavailable for a comment.

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