MINISTER of finance Harris Georgiades wrote to the president of the House finance committee on Monday in a last-ditch attempt to stop the legislature approving an ill-conceived bill, the sole purpose of which is to curry favour with a very noisy pressure group – the bondholders. However, the opposition parties have signalled their intention to approve the bill, which was submitted by the outgoing president of the House Yiannakis Omirou, in today’s final session of the current parliament.
The bill will allow the face value of the now worthless bank bonds held by a bank’s client to be offset against his or her loans. The bondholders of the Bank of Cyprus and the now defunct Laiki had organised themselves into a vociferous pressure group demanding they were given back their money, and this the way the populist parties hope to satisfy them ahead of the parliamentary elections. They all know that if approved, the law would be unconstitutional and full of holes, but this is of no concern to them. They just see its approval as a vote-winning exercise, with the added advantage of putting DISY, which will vote against it, in negative light; it would also embarrass the government as the president is certain to send the law back to the legislature.
There are countless reasons why this law could not stand. As Georgiades noted in his letter it is blatantly discriminatory – it compensates bondholders that had loans with Laiki or BoC but not for those who did not. It also discriminates against other loan-holders who did not invest in bank bonds. Absurdly, the law would value the bank bonds at face value, even though their price had fallen significantly before the bail-in.
Also, it would force the BoC to do this for Laiki bondholders, who had been given loans worth €94 million to buy the bonds. Why support only the bondholders of a bankrupt bank? Why are bondholders with loans the only investors that would be assisted by the law, when the Resolution Law stipulated that, like shareholders and depositors of a failing bank, they would be bailed in?
The bill also violated the separation of powers as it prevented the judiciary from deciding which contracts were invalid, because it was based on the assumption that the issue of all bank bonds was illegal, in order to justify the offsetting with loans. This was for the courts and not the legislature to decide.
It is scandalous that lawmakers would knowingly legislate against the rule of law and in violation of the constitution but not a surprise. It is something we should expect from a parliament that in its five years has displayed shabby practices, populist irresponsibility, superficiality and ignorance of the constitution, parties always prepared to sacrifice the national interest for a few hundred votes. As for the outgoing president of the House, Omirou, who will not stand for re-election, he will be remembered for tabling this farce of a law.