Administrator Cuts to Farcical Levels

4 March 2015

Whatever the original intention of the Central Bank of Cyprus in appointing Dinos Christofides as Administrator of the affairs of the Cyprus branch of FBME Bank, it is now fast degenerating into farce. Of course, there could be also something entirely more sinister at work.

As of this week, the Administrator has decreed that the daily transaction level permitted for FBME account holders who can get to Nicosia, the Cyprus capital, has been cut from EUR 1,000 a day to EUR 200. For justification he writes:

“This measure has become necessary due to the diminishing available liquidity in Cyprus and the refusal of our main correspondent banks to facilitate the return of our funds placed with them,” (italics added).

Extraordinary! The level of FBME Bank funds currently held by the Central Bank of Cyprus is EUR 160 million. Liquidity problems? We think not. Is he still claiming to be able to hold the bulk of these funds as deposit protection insurance, when FBME Bank has been paying its annual levy in the Cyprus insurance scheme since 2004 – possibly one of the few banks on the Island to do so.

His use of the word ‘ours’ and, elsewhere, ‘mine’ in relation to FBME funds is also alarming and conflicts with actions seemingly designed to harm the interests of FBME Bank. It sounds like the reverse of the Stockholm syndrome where a hostage ends up identifying with his or her kidnappers. Here it is the kidnapper who appears to be trying to show himself as the victim.

Normally, there would be an appeal to the Central Bank of Cyprus to face facts and act in the responsible manner expected of a supervisor working, as most of them do, for the good of the banking sector, in the interests of depositors and the well-being of the Republic of Cyprus. But we feel they have their hands full elsewhere at the moment.

The resignation of the Special Administrator of the defunct Laiki Bank as a result of the gross interference by the Central Bank of Cyprus is a fast-evolving scandal. The Central Bank, it seems, countermanded her appointment of legal representation in the legal case against the former chairman of Laiki. Their appointee is widely perceived as being conflicted by past association with the Laiki chairman – somewhat like the conflicts of interest permitted to the Administrator in the FBME case. The Laiki Special Administrator’s resignation letter of Monday’s date has created a media storm.

Is it any wonder that the Central Bank of Cyprus scored the second lowest mark for public esteem in research carried out for the media commentator Stockwatch, published on 31 December 2014. Its score must be even lower now. This research gave rise to great concern with a Board Member of the Central Bank of Cyprus, Stavros Zenios, who warned in his blog published on 1 February that the institution will drag the country into new disasters if it carries on behaving as it has in the past. And the great opponents of reform in the Central Bank of Cyprus? Its own senior management, he wrote.

How much more damage to the interests of taxpayers and the financial sector will the Central Bank of Cyprus be allowed to cause, as it thrashes around like a bull in a china shop?