The administrator of the defunct Cyprus Popular Bank, widely known as Laiki, said that the decision of the Russian central bank to revoke the licence of its subsidiary in Russia came out of the blue, while he was in the final stage of negotiations for its sale, raising questions about probable expediencies.
“On Monday, a representative of a major corporation came to make the final agreement on the price for the sale” of Rosprombank, Chris Pavlou, who was appointed administrator of Laiki in 2015. “We agreed to meet the next day together with our lawyers and to finalise the deal, said in a telephone interview on Wednesday. While we were sitting together at 10 am at my office, I was told that a temporary administrator came in”.
Pavlou said that he had prior to that received no notification from the Russian central bank about their intention to revoke Rosprombank’s licence, in which Laiki has a 50.4 per cent stake, nor that it intended to appoint an administrator. “I checked my emails and found no notification,” he said, and added that neither him or his deputy “who travelled five times” to Russia, were informed by the the Russian central bank about its intention.
The Central Bank of the Russian Federation said on Tuesday that it decided to revoke Rosprombank’s licence citing the latter’s lack of compliance with anti-money laundering legislation and its high-risk credit practices.
Pavlou said that, while Laiki had a majority stake in the Russian bank, it did not have effective control over the management, citing the terms of the acquisition contract.
“Since 2008, when they bought it, it was a catastrophe,” he said. “It was losing money every month”.
As a result, the price at which the Russian unit would be sold to the investor on the day the Russian central bank decided to withdraw the licence “wouldn’t be high”.
“What was important was to stop the bleeding,” he said.
Pavlou dismissed criticism from Sykala, a group representing Laiki creditors, which asked him to step down, and reminded them that he had already tendered his resignation in October.
“I have no hesitation to resign,” he said. “I was pressured into taking this job. But if I resign, some attempt to take advantage of the situation to plunder” the assets.
Adonis Papaconstantinou, a Sykala official, said on Wednesday that the value of Laiki assets dropped from €900m in March 2013 to below €300m a few days ago. Pavlou clarified that the figure also includes a 9.6 per cent holding in Bank of Cyprus, which is administered by the Central Bank of Cyprus’s resolution authority.
The value of the holding in Bank of Cyprus fell “because we were diluted 50 per cent,” Pavlou countered, referring to the capital increase at the bank in 2014, adding that Sykala members took to the streets years ago to protest against a proposal to dispose of the holding and compensate Laiki creditors.
He added that the price of Laiki’s unit in Greece, the Investment Bank of Greece “went up at least 50 per cent while that in Malta at least 30 per cent”.
Laiki depositors lost all their deposits in excess of €100,000 in Cyprus’s March 2013 banking crisis. Bank of Cyprus absorbed Laiki’s operations in Cyprus in exchange of a 19 per cent stake in Cyprus’s largest lender.