By Stelios Orphanides and Jean Christou
A tug-of-war between the Central Bank of Cyprus (CBC), FBME and its striking staff on Monday has hit depositors waiting for their payouts under the Deposit Guarantee Scheme (DGS).
The management committee for the DGS said that due to the strike declared on Monday at FBME and the lack of cooperation by the bank itself, the special administrator was not able to proceed with the identification of the depositors and the certification of relevant documentation at the bank’s premises.
The maximum compensation amount for each depositor will be €100,000, and the amount will be decided by the management committee, depending on each person’s deposits but also on their obligations toward FBME bank.
“With respect to amounts exceeding €100,000, a legal procedure to appoint a special liquidator is pending who will take over the liquidation of assets to pay out obligations as provided by the law,” the CBC said. “However, the process to issue a court order is held up by the objections raised by FBME”.
Around 6,500 depositors are expected to receive the payout. They have now been asked to go in person to the CBC in Nicosia during office hours. Due to the latest developments, the CBC said, “there may be a possible delay in the payout procedure”. Only a very small number went to the central bank’s premises on Monday.
The central bank put FBME under administration in July 2014, after the Financial Crime Enforcement Network (FinCEN), a division of the US Treasury, described the lender as “of primary money laundering concern”. Last month, FinCEN reaffirmed its decision to cut FBME’s ties to the US banking system, which was followed within days by the dismissal of 136 staff by the special administrator in Cyprus.
FBME staff began an indefinite strike on Monday demanding revocation of the dismissals and payment of their dues as stipulated under labour laws.
The employees, who gathered outside the Nicosia branch, also demanded fairer treatment and adherence to the provisions of labour legislation on maternity protection, after the special administrator, they said, had on March 29, fired “two of our colleagues unlawfully and out of vengeance”.
This, they claimed, was an attempt to intimidate workers because they had pointed out mistakes made by the special administrator when the CBC asked “us workers to send to FBME Bank customers false statements about their deposits”, the staff said in an announcement.
Two days later, they added, 136 of the 165 workers,” including eight pregnant women and mothers on maternity leave, were notified that they were fired”, they added. They said until now, they had not received their dues and that no notice provided by law was given for the dismissals.
Remaining staff at the bank were facing serious practical difficulties in carrying out their duties as a result of the mass dismissals, the staff said.
The special administrator’s legal adviser, Pavlos Kourtellos, told them their letters of dismissal did not constitute “termination of service or redundancy “but “cancellation of contract” and thus they had no claims, the employees’ announcement said.
The Tanzanian bank is not signatory to any collective agreement with Cyprus bank workers’ union ETYK.
The central bank declined to comment on the strike and referred to the Special Administrator Chris Iacovides. He said: “I reserve my right to answer to the employees’ strike tomorrow”.
The Cyprus Business Mail understands that if workers did not deliver access codes to the bank’s software system on Tuesday, access to the system would be found in an alternative way.
The CBC announced its decision on payouts to depositors on Saturday, angering the bank, which said on Sunday the central bank had only triggered the DGS so that the supervisory body could claim to have fulfilled its duties to depositors “and evade further exposure for misconduct”.
Following “a series of unilateral, illegal, arbitrary and irresponsible actions” by the CBC, the announcement, the bank said, came 21 months after the Resolution Authority and the CBC acted against FBME and at the end of “a protracted period where the special administrator choked depositor access to funds on the instruction of the CBC for the expressly stated purpose of maintaining sufficient funds in the bank to repay the deposit protection scheme”.
“It is incorrectly stated that the economic condition of FBME is the reason for activation. The truth is that funds are available but the CBC’s mishandling of the situation has starved depositors of access to funds,” the bank said.
“By taking action now, the CBC seeks to create a fait accompli situation rendering moot any decision of the courts in the upcoming liquidation action and designed to obscure and evade their liability to all relevant parties that arises from the action over the past year and a half. Depositor protection has clearly not been the priority for CBC at any point,” the bank said.
In response, the CBC said the delay was down to FBME because “the alleged owners of the bank” had resorted to the Nicosia District Court against the central bank’s decision to issue a special liquidation order for the Cyprus branch.
The order, it said, would have allowed the necessary action to repatriate funds.
After last month’s FinCEN ruling “correspondent banks froze or closed their accounts with the bank, initially in US dollars and subsequently other currencies, while other corporations, such as Reuters and Bloomberg, severed the bank’s access to their systems, the central bank.
“These events rendered banking operations impossible,” it added.
FBME’s overall deposits are estimated at roughly €1.3bn to €1.4bn.
By Stelios Orphanides and Jean Christou