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Former BoC official pressed over knowledge of 2012 capital shortfall

Former CEO Andreas Eliades

 

The Bank of Cyprus board had every reason to believe the sale of its insurance companies would go through in June 2012, and that its capital shortfall would thus not exceed the estimated amount, then non-executive board vice-chairman Andreas Artemis told the Nicosia criminal court on Monday.

Artemis, one of six defendants, was cross-examined by the state prosecutor over market manipulation charges in failing to disclose the true picture of the lender’s capital needs, which bank officials had repeatedly estimated at €200 million in May 2012 before more than doubling their estimate a month later.

He invoked the content of an email he had sent the bank’s management on the morning of June 27, the day the BoC announced applying for government-funded support to the tune of €500 million, in which he described what the announcement should include.

Artemis said that at that time the bank was genuinely hopeful that the proposed sale of its insurance companies would go through, and this would offset any capital needs.

Asked what might happen if the deal fell through, he replied that a significant source of capital would be lost.

Pressed to say whether the risk of the insurance firms not being sold was real, Artemis said “we were expecting offers for them”.

When the state prosecutor submitted that the minute-keeper’s notes from a June 14, 2012, board meeting attributed a quote to him, according to which “if the insurance companies are not sold the capital shortfall might rise to €300-€400 million”, he said he had no particular amounts in mind at that time.

“What I felt I had to say was that if the companies are not sold the shortfall might increase,” he said.

“You tried to convince the court that the €300-€400 million figure was random, but the truth is that you knew this amount because you had been informed in [board chairman Theodoros] Aristodemou’s office by [CEO Andreas] Eliades of the insurance companies’ issue, which brought the shortfall to about €400 million,” the state prosecutor countered, a submission Artemis denied.

“This assertion could not be true because I was not present at the meeting in Mr Aristodemou’s office,” he said.

Artemis said that in the morning he had attended a meeting at Aristodemou’s request, which would decide whether or not the bank would pay interest on capital securities, after which he went straight to the board meeting.

Asked how, then, he briefed Aristodemou of the outcome of the earlier meeting, which the chairman announced to the rest of the board himself, Artemis said he did so during one of the breaks.

He further rejected the prosecutor’s submission that no decision to sell the insurance companies had been taken because of disagreements between board members, saying it would have been impossible for the Bank of Cyprus to have staged an entire play with foreign consultants, international procedures, virtual data, and contract terms, in order to delay announcing its capital needs.

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