Cyprus Mail

Bank of Cyprus to pay damages for misleading sale of securities

Around 3,790 Bank of Cyprus customers have contacted the bank themselves asking for information about the scheme.

The Larnaca district court has awarded over €157,000 in damages to two people after it found that the Bank of Cyprus had mislead them into buying securities in two separate instances in 2009 and 2011.

The court however acquitted the central bank and the state which had been accused of negligence and lack of supervision.

The private holders of convertible enhanced capital securities issued by the Bank of Cyprus and now-defunct Laiki Bank claim they were mis-sold financial products, which were essentially wiped out following the March 2013 events, and demanded to be compensated.

Many had also drawn loans using the securities as collateral, which they are now being asked to repay.

On one side, the court said, there was a large bank with many branches, including overseas, and on the other were the plaintiffs, an oil refinery worker who was unemployed at the time the bonds were acquired, and a housewife.

“Between these individuals there was a relation of trust,” the court said. “It was the only bank they did business with for over 30 years and they kept their savings there.”

According to the court, BoC sold the securities to the plaintiffs in 2009 and 2011, presenting them “as safe financial products, (time deposits) something which was untrue since they were bonds which carried risks, and especially the 2011 ones were possibly not suitable for all investors.”

The bank had presented the bonds as an opportunity and asked them to move fast, according to the court.

It found that the plaintiffs were not provided with the necessary information in a comprehensible form so that they could be reasonably able to understand the risks of the instruments in question and make an informed choice.

“The bank abused the trust between them and violated its obligations. Its behaviour was not fair,” the court said.

The court was satisfied that the plaintiffs managed to prove they had suffered losses to the tune of €157,336.

The court found no wrongdoing on behalf of the central bank and the state.

The total amount put in securities across Cyprus’ banks is said to be about €1.4bn – €600m concern BoC and €800m at Laiki who has since been shuttered.

Laiki stopped paying interest on the bonds after incurring losses from a Greek sovereign debt write-down in 2011. The securities offered an attractive return of 7 per cent in some cases. They were later converted to shares.


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