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Cyprus

Laiki’s declining goodwill value not disclosed, court hears

Defunct Laiki bank

By late 2011 Laiki Bank had sustained a decline in its goodwill value of at least €330 million, a fact not disclosed in filings to investors, an investigator for the Cyprus Securities and Exchange Commission (CySec) told the Nicosia criminal court on Tuesday.

Rakis Christoforou, who had headed an investigation into Laiki on CySec’s behalf, said that at September 30, 2011 the lender’s goodwill had diminished by anywhere from €330 million to €576 million.

The bank, however, did not conduct goodwill impairment testing as it ought to have done.

Testifying for the prosecution, Christoforou said there were “multiple and significant indications” that Laiki’s goodwill value had taken a hit.

Among these were the deteriorating economic situation in Greece – where Laiki operated in addition to Cyprus – the haircut on Greek government bonds, and the loss of deposits.

Christoforou’s testimony and cross-examination will continue on Wednesday.

The defendants in the trial are Laiki’s then-managing director Efthimios Bouloutas, his deputy Panayiotis Kounnis, non-executive vice-president Neoclis Lysandrou and executive board member Marcos Foros.

They face charges of market manipulation and submitting false or misleading information with regard to publishing an interim consolidated financial statement in November 2011, in which they omitted to include a goodwill writedown of €330 million for Marfin Popular Bank’s – as Laiki was then known – operations in Greece.

The prosecution contends the defendants were aware of the bank’s deteriorating goodwill at the time.

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