Central Bank’s Statement Clarified

29 August 2014

During the evening of 28 August, the Central Bank of Cyprus issued a statement regarding the crisis over the Cyprus branch of FBME. It was welcomed by the shareholders as a contribution to the debate – or at least a start of a debate.

For instance, it was good to hear that the Central Bank does not feel hostility towards FBME. So far, it has not been the impression that has been created during the five weeks since they took over the Cyprus branch, and during which they have remained for the most part absolutely silent as to their intentions. But if there is to be no hostility that is something on which we can build and it should be applauded.

The Central Bank’s statement commented: “As soon as the problem was created, the actions of the Central Bank have been geared at normalising the operations of the FBME Cyprus branch and protecting its depositors.” It is quite clear that few if any depositors feel themselves to have benefited from this protection – not being able to access their accounts for over five weeks has caused massive harm. This is not ‘normalisation’.

They say that the problem with transactions is due to payments being refused by correspondent banks – which we continue to query as there are correspondent banks who are willing to transact. They also say that their actions are being hampered by the bank owners, and we say to that ‘how?’ Let us know how the owners are preventing a normalisation at the Cyprus branch; give us details.

The Central Bank gave three reasons why transactions by customers of the FBME Cyprus branch are being obstructed.

First, they said, the Cyprus branch is not in a position to use the Single Euro Payments Area (SEPA) for euro bank transfers. It is true that the original correspondent institution refused to assist, but in late July another major European bank (Commerzbank) did agree to process euro transactions. We advised the Central Bank’s Special Administrator of this, but he categorically refused to allow us to set up these arrangements.

Secondly, the Central Bank wrote that the SWIFT payment line was halted. Again, this is true, but it only happened on 18 August when the Cyprus Administrator attempted to have substantial FBME deposits transferred to the Central Bank of Cyprus accounts. Given that the Central Bank of Cyprus already has 114 million Euros of FBME’s deposits why can’t they use these for payments? And why are they holding onto them? Also, what happened in terms of allowing transactions in the four weeks prior to 18 August?

The third reason for a bar on payments given in the statement is that FBME and its owners have blocked the use of deposits in other banks. For an answer readers should refer to the point above.

Finally, the Central Bank said the FBME owners refused to meet, though they acknowledged that at the time a meeting was discussed one shareholder was abroad and the other was unwell. Both shareholders needed to be available and this was communicated to the central Bank by letter from the law offices of Markide and Markide & Co LLC with whom the Central Bank had exchanged correspondence. But the owners are still willing and always have been keen to hold such a meeting; it should be simply re-scheduled. Every effort should be made to resolve the issue of the Resolution of the Cyprus branch for the good of the Bank’s depositors, for the good of the Bank and the good of the Republic of Cyprus.

FBME shareholders reaffirm their willingness to work seriously to find a positive solution not only for this matter but also for the good of Cyprus as a whole – now and in the future.