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Cyprus

Laiki could not have known extent of losses in 2011, court told

Conditions did not permit an accurate calculation of the losses inflicted on Laiki by the EU’s decision to write-down Greece’s debt in 2011 and the lender’s reduction in goodwill, an expert witness testified in court on Monday.

Senior Bank of Greece (central bank) official Michail Michalopoulos said by June 30, 2011 there had been no proof that future Greek government bond (GGB) payments would be taking place.

Michalopoulos, who is in Cyprus to testify on behalf of former Laiki executive Efthimios Bouloutas, said the first GGB write-down, announced in July 2011, was not implemented, while the exact conditions of the second one, decided in October that year, were not specified immediately.

Bouloutas is on trial with his then deputy Panayiotis Kounnis, non-executive vice-chairman Neoclis Lysandrou and executive board member Marcos Foros on 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 write-down of €330m for Marfin Popular Bank’s – as Laiki was then known – operations in Greece.

On March 21, the court found that prosecutors had established a prima facie case and the former executives must mount a defence to have it disproved.

“On October 9, 2011 in particular, it was impossible to specify the effects on goodwill by the PSI+ (private sector involvement, or second write-down) to investors … A lot of key information and parameters were absent,” he said.

Michalopoulos added that the precise terms of the PSI+ were eventually specified in February 2012.

Earlier this month, Bouloutas told the court that it was the Cypriot parliament’s decision in March 2013 that caused the banking collapse.

He was referring to parliament’s decision to shutter Laiki and seize deposits in Bank of Cyprus after having rejected a milder haircut on all deposits in all banks a week earlier.

On the goodwill omission, Bouloutas said the board did not have a clear picture of the situation created after the EU decided the second writedown on Greek debt in October 2011, inflicting huge losses on Laiki and Bank of Cyprus of around €4.5bn.

He said it had been completely unexpected and without details. The questions raised at the time where only answered on February 24, 2012, he told the court.

 

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