Just 120 FBME depositors apply for DPS

30 April 2016

It has been confirmed that just 120 out of 6,500 insured depositors of FBME Bank’s branch in Cyprus have applied to the Central Bank of Cyprus (CBC) under its deposit protection scheme. This scheme pays a maximum of EUR 100,000 to each named account holder in a stricken bank – anything above this amount is lost.

Why so few? The obvious reason is that there is a complete breakdown in trust of the Cyprus banking supervisor, which for several years – and not just related to FBME Bank – has shown extreme bad faith towards bank customers. This distrust is equally strong among both Cypriot and non-Cypriot account holders (Cypriots comprise around 10 per cent of FBME’s customer base).

Simply put, clients worry that by signing up to the CBC’s deposit protection scheme they will lose their rights to bring future action against the CBC for its serious and illegal mismanagement of FBME, a healthy bank. Signing now could mean that many depositors will lose the rest of their money despite the fact that FBME has ample funds to meet all demands.

The CBC is said to have become highly concerned at its inability to pay out to even those few depositors who have applied for the insurance. Senior central bank officials are blaming the remaining workforce of FBME’s Cyprus branch who have gone on strike. Anything but acknowledge their own ineptitude in bringing about this situation despite having had opportunity after opportunity to resolve the problem with all of the employees, those they have sacked without legitimate cause and those who they are trying to keep on. The fact is that the CBC has had absolute control over everything at FBME in Cyprus for 21 months, during which it has audited branch accounts under the deposit protection scheme and does not need to wait for the employees to return to work to make the payouts. CBC officials have all the required information at their fingertips – or should have if they have been working with any semblance of diligence.

In accordance with EU and Cyprus law, the funds for paying out to the insured depositors should not be coming from FBME’s deposits held by the CBC, but from the CBC’s own insurance fund, into which FBME and other banks in Cyprus should have been paying for several years. What has happened to this fund and why is it not being for the purpose which by law it was created?

So, what do we have? An illegal attempt to liquidate the branch of a solvent bank; an underhand measure to circumvent the courts; an illegal sacking of employees, and a ruse to use depositors own money to pay out their own insurance. No wonder the vast majority of depositors have seen through the highly questionable actions of the CBC.