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Our View: Central Bank assurances about Panama Paper can’t be taken seriously

CYPRUS featured prominently in the Panama Papers, the unprecedented leak of files from the database of offshore law firm Mossack Fonseca, which helped the mega-wealthy hide their money in tax havens. Cyprus-based bank RCB was repeatedly mentioned in The Guardian’s report by journalists who had access to the 11.5 million files, with allegations claiming that it had given unsecured loans worth a billion dollars to companies linked to friends of Russia’s president.

RCB said the allegations were untrue and said “the RCB bank, as a principal (sic), did not and does not provide unsecured loans.” It also said: “The bank always acts in a transparent manner and all information about its activities is available to the relevant Cypriot and European authorities… The bank’s operations and procedures are under continuous scrutiny by the Central Bank of Cyprus and the European Central Bank.” There had also been an audit within the framework agreed by the Cyprus government and the troika.

After the publication of the allegations, the Central Bank of Cyprus (CBC) also issued a statement in which it said it “is assessing the information to the extent that it may concern the Cypriot banking system and taking, where necessary, appropriate action.” If this was meant as re-assurance, the CBC should allow us to have our doubts, because its record on bank supervision is – as we all know – appallingly poor. Its supervision of the banking sector was so embarrassingly inadequate it led to the collapse of the banking system.

None of its senior directors were sacked or at least demoted for this collective failure – one was rewarded with an executive position on the board – but are still in the key positions. So when the CBC announces it “is assessing the information” this does not inspire much confidence. Why would they do a better job now than they had done in 2010, ’11 or ’12? Is it because the current governor, who has been shown to be out of her depth, is better at the job and runs a tighter ship than her predecessors?

The truth is that the top people of the CBC, including governors, were deemed blameless for the collapse of the banking system they were supposedly supervising. They did nothing, ignoring all warnings as if protecting the banking sector and people’s deposits was someone else’s responsibility. Former executives and directors of Laiki and Bank of Cyprus are facing criminal charges for the collapse of the economy but the CBC’s top people were not held accountable for what happened. Perhaps this is because as, public employees, they cannot be punished for incompetence. This is why any assurances given by the CBC about any bank, now or in the future, cannot be taken seriously.

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