31 October 2015

FBME Bank Limited has initiated plans to migrate deposits held at its Cyprus branch to its head office in Tanzania, in this way opening access for depositors to their funds. This follows a situation where depositors have had their access restricted to a paltry EUR 1,000 a week and in some cases have experienced what is effectively a bar on their accounts on the orders of the Central Bank of Cyprus (CBC), which took control of FBME’s Cyprus Branch in July 2014.

FBME has written to the CBC in a further attempt to gain the cooperation of the Cyprus authorities to the move. The first letter was sent on 20 October with a follow-up this past week to prod the Central Bank into providing an answer. They have still to respond to the specific request to migrate accounts to Tanzania.

The action follows contact between FBME Bank and many of its depositors to provide a new avenue for depositors to gain access to their own money. At the same time it offers the Cypriot authorities a way out of their dilemma in the CBC’s responsibility to pay the full level of deposit protection insurance on the accounts held by the Cyprus branch of FBME.

Over the past 15 months, FBME has launched many initiatives to enable customers to regain control over their funds held with its Cyprus branch. These have included attempts at dialogue and cooperation with the CBC, litigation in the courts and the resort to international arbitration at the ICC in Paris. Without explaining its reasons, the CBC has consistently spurned such approaches, meanwhile incurring reputational damage, substantial bills for the taxpayers of Cyprus, and the more serious risk of losing of hundreds of millions in eventual compensation payouts.

The problems stem from the CBC’s decision to take over FBME’s Cyprus branch in July 2014, using a resolution decree for which it had no legal basis. It blocked all access to accounts for six weeks and sought to sell the branch without recourse to the Bank’s owners or managers. The CBC subsequently appointed administrators to sell or liquidate the branch without understanding the ramifications and illegality of its actions. Ironically, at the very outset the CBC said its measures were taken to defend the interests of depositors, something it has notoriously failed to do in its subsequent decisions.

The imposition of resolution measures on FBME’s Cyprus branch was made completely without recourse to FBME Bank’s home regulator, the Bank of Tanzania, or its owners or managers.

It was just one of a number of disastrous initiatives taken by the CBC and its agents across the banking sector which have attracted severe domestic and international criticism. Much of this has stemmed from the CBC’s Resolution Unit headed by the heavily exposed Michalis Stylianou.

The CBC and its resolution bodies have painted themselves into a corner and their best option is now to let the depositors move to Tanzania, those who choose to do so. FBME will continue to strive with the Cyprus authorities to find the best solution for depositors.