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Cyprus

Moves to remove co-op central bank from auditor-general’s remit

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The attorney-general will be asked to weigh in – again – on whether the Co-operative Central Bank (CCB) falls within the remit of the Audit Service per the terms of Cyprus’ bailout agreement with international creditors, finance ministry representative Dionysis Dionysiou told the House finance committee on Monday.

The committee was discussing a legislative proposal by Disy leader Averof Neophytou, by which the auditor-general’s office would no longer be entitled to conduct administrative audits of the CCB.

Neophytou asked the finance ministry to communicate the documents comprising the agreements signed by Cyprus and its international creditors – the Memorandum of Understanding and the Relationship Framework Agreement – to Attorney-General Costas Clerides, as he claimed these contained clauses precluding such auditing.

Auditor-general Odysseas Michaelides replied that “anyone handling public money should be audited”, adding that, given the fact that the CCB is a state-owned business to the tune of 99 per cent, after it was injected with €1.7 billion of taxpayer-funded capital in 2014 and 2015, it is subject to scrutiny by the Audit Service.

“In our view, without such scrutiny there can be no transparency and accountability, and the public cannot be informed,” Michaelides argued.

Ending the administrative audit would leave only financial auditing in the CCB, which is essentially an opinion on the organisation’s financial statements by private auditors, he argued.

Other systemic state-owned banks in Europe, “in Germany, Slovenia, and Portugal”, are subject to audits by the relevant authorities in their countries, Michaelides added.

Finally, the auditor-general said such a decision would create a dangerous precedent, citing the examples of the Cyprus Telecommunications Authority or the Cyprus Broadcasting Corporation.

“The Audit Service’s scrutiny should normally not bother the CCB, as it would help it adopt best business practices,” Michaelides said.

Dionysiou said the finance ministry backed the proposal.

“The CCB is overseen by the [European Central Bank’s] Single Supervisory Mechanism,” he said, adding that the MoU called for its auditing to be assigned to external audit houses.

According to Dionysiou, administrative audits of licensed lenders are by law conducted by internal audit departments.

“These are independent in-house audit units, which report their findings to the Central Bank of Cyprus,” he said.

The attorney-general’s earlier opinion on the matter, he added, made no reference to either the MoU or the Relationship Framework Agreement.

CCB chief Takis Taoushianis said the company’s goal is to “operate on par and under the same rules as the competition – other systemic banks in Cyprus”.

“We are interested in the administrative part inasmuch as the board of directors can be able to manage the organization in the same way as other similar organisations in our country,” he said.

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