THE ACCUSATIONS of maliciousness and incompetence made against the Central Bank of Cyprus (CBC) by the lawyer representing FBME bank, former attorney-general Alecos Markides, do not seem without substance. It now appears that a decision had been taken from the time the CBC placed FBME under the resolution authority in July 2014 to close down the bank. The plan, according to the CBC’s head of supervision Yiangos Demetriou, was to sell the bank but because of the nature of the allegations no buyers were found and the CBC was forced to liquidate it.
But was this the only option available to the CBC after the report of the US Treasury’s Financial Crime Enforcement Network (FinCEN) that claimed the bank was “of primary money laundering concern” and was linked to terrorist organisations? The CBC could have requested evidence from FinCEN instead of choosing to “crush” the bank, Markides said yesterday and he may have a point. Demetriou’s response was that FBME was doomed as soon as the FinCEN report was issued because “correspondent banks immediately froze or closed the bank’s accounts first in dollars and then in other currencies.”
From day one, the central bank seemed intent on penalising FBME’s owners over the allegations, which have yet to be backed by concrete evidence, by refusing any co-operation with them and working on the assumption that their involvement was over. Contrary to what Demetriou claimed this was not in the best interests of the Cyprus Republic, which could lose the case brought against it at the International Court of Arbitration in Paris by the bank’s owners and be forced to pay damages of hundreds of millions of euro. There is also a case in the New York courts not to mention the endless litigation in Cypriot courts.
Even the way the FBME employees were treated by the special administrator tends to support Markides’ claim of maliciousness. Some 136 workers were fired without any of their rights respected – notice, holiday pay, percentage of 13th salary etc – being informed their sacking did not constitute termination of service or redundancy, but “cancellation of contract.” This never happened to Cyprus Airways employees when the company was liquidated, the taxpayer funding higher compensation than the employees were legally entitled to. But it seems our authorities also wanted to penalise FBME’s employees.
As if this were not bad enough, the CBC subsequently blamed the employees’ strike for the inability of the Committee Deposit Guarantee Scheme to make out payments to depositors. The decision to return money to depositors was taken on Saturday afternoon almost 21 months after the resolution authority had blocked access of depositors to their money, allowing only limited withdrawals. So is the staff strike to blame for the delay or the CBC appointed administrator? What is becoming apparent is that the CBC has made a big mess of the FBME case and that this bungling could cost the taxpayer hundreds of millions. We hope we are wrong.