Liquidation filing for legacy Laiki took seven years

The Central Bank of Cyprus (CBC) has got the ball rolling for the liquidation of legacy Laiki Bank, more than seven years after the lender’s demise, it emerged on Monday.

Central Bank chief Constantinos Herodotou told parliamentarians that the CBC – in its capacity as the Resolution Authority – has made a liquidation filing for Laiki with Nicosia district court.

The filing was made on January 8 this year.

In parliament, Herodotou said legacy Laiki’s liquid assets amounted to €232 million as at the end of September 2020. This included the €140 million raised by selling off the lender’s various assets.

By comparison, in 2013 KPMG had valued Laiki’s total assets at €663 million.

Whereas lawmakers welcomed the move to finally liquidate the entity and give something back to the burned creditors, they also censured the delays resulting in a €430 million decline in the value of the bank’s assets.

The CBC governor said he sympathises with the legacy Laiki’s creditors, but cited time-consuming legal and other complexities in the process to sell off the bank’s subsidiaries in Malta, Greece, Serbia, Russia and Ukraine.

For example, a dispute over a mere €3 million difference in Greece had required an arbitration process.

Speaking to the media later, Adonis Papaconstantinou, head of the Laiki Bank Depositors Association (Sykala), said Central Bank governors have come and gone since 2013, but the decline in value of the assets has been the only constant in the entire affair.

Papaconstantinou said Sykala’s own assessment of Laiki’s assets back then was actually around €900 million – higher even than KPMG’s.

He demanded that Laiki’s remaining shares in Bank of Cyprus be distributed to Laiki’s creditors to do with them as they see fit.

Papaconstantinou went on to take a dig at ex-CBC governor Chrystalla Georghadji.

He said that the Investment Bank of Greece – Laiki’s subsidiary in Greece – was a robust entity that could have been salvaged rather than being sold off at a fraction of its true worth.

“But the answer we got at the time from Chrystalla Georghadji went like this: ‘Who told you that the objective is to maximise [Laiki’s] value, our mandate is to sell off’.”

Laiki – also known as Popular Bank – was placed under resolution in 2013, its depositors at the time classed as creditors for the purposes of the ‘haircut’.

Since then earnings from the sale of its assets have been channeled into a special account held with the Central Bank.

Laiki’s former creditors (depositors and bondholders) have been fiercely critical of authorities, claiming that the delay in offloading the assets has seen a diminishing value on those assets, and thus on the refunds they can expect.

By March 2013, when it folded, Laiki had amassed some €9 billion in emergency liquidity assistance (ELA), the bulk of which was green-lit at a time many believe the bank was insolvent.

ELA is authorised by national central banks. According to the regulations, insolvent banks are not eligible for ELA.

That debt was transferred to the Bank of Cyprus, which absorbed most of Laiki’s operations.