4 September 2014

Owners of FBME Limited have welcomed as a positive first step in the unfreezing of accounts at FBME Bank’s Cyprus branch the measures announced by the Special Administrator on 1 September. These allow some depositors access – highly restricted – to their money in amounts of EUR 10,000 per diem.

The Shareholders believe that this should pave the way towards the prompt and orderly return of the branch to the control of FBME Bank and its Board of Directors, for the good of depositors, employees and the Bank, and for the reputation of the Republic of Cyprus as a whole.

A start has been made perhaps, but there are huge questions still unanswered. FBME Limited, the Bank’s holding company, has queried why this process had taken so long, given that Resolution measures have been in place for six weeks during which there have been ample funds available for depositors. Moreover, why has an amount of only EUR 10,000 a day been mandated? FBME has $1.7 billion-worth of available liquidity at present so there are ample funds to meet demand. Finally, why have these arrangements been set up with just one other bank – the Bank of Cyprus?

What was not made clear by the announcement by the Central Bank’s Special Administrator was that there are many depositors who have not been granted this access, most of whom in no way should be a target for such discriminatory treatment. So the question of what was behind the decision to grant highly limited access to some but not to others needs to be addressed. Was the Administrator’s announcement mostly motivated by PR concerns aimed at relieving the climate of criticism, rather than a real contribution aimed at returning the bank to normal operations? FBME Limited invites the Special Administrator to make public a road map for such an orderly return, and will participate constructively in the process.

There is no doubt that continual delays and this piece-meal concession have caused untold harm to depositors and to the reputations of both FBME Bank and the Central Bank of Cyprus.

Further to that, the Cyprus banking authorities have started to blame the Bank of Tanzania for a situation that is all their own making. They have tried to ignore the Home Regulator of FBME Bank’s head office in Tanzania and its Statutory Manager, and they have continued to take unilateral action in blatant contradiction to all accepted norms. In these cases there must be coordination between Home and Host Supervisors, but in the approach taken by the Central Bank of Cyprus this has been signally missing.

Still, a start has been made by the Central Bank of Cyprus in loosening its grip on other people’s money. And that should be applauded – even if only by one hand – as it moves ahead from the destructive impasse of the past six weeks. Perhaps it points the way to a change of heart – we live in hope! It is important that a proper solution is sought. In this regard, the FBME directors are willing to work seriously for a way out of this deadlock.

The Facts of the Matter

The announcement by the Special Administrator of the Central Bank of Cyprus on 1 September has widened the debate about the approach used in implementing Resolution measures against a branch (in this case FBME’s Cyprus branch), when it is done without recourse, reference or even by showing basic respect to the head office, its Statutory Manager or the Home Regulator of FBME Bank, the Bank of Tanzania.

At no time has proper consultation been conducted, despite repeated promptings, verbally and in writing, by the Home Regulator. The Central Bank of Cyprus has continually acted as if it has full responsibility over the entire Bank with no other parties to consider. Recent actions taken by the Central Bank of Cyprus and its Special Administrator have been made in direct contradiction to the express wishes of the Bank’s head office Statutory Manager.

Certain other facts are indisputable:

Fact: On 21 July the Central Bank of Cyprus announced its decision to take over the Cyprus branch in order to sell the branch. The Special Administrator took over on 22 July. So there were four weeks between the onset of Resolution and the termination of the SWIFT service on 18 August. Why didn’t transactions commence early in this period? The SWIFT lines were taken down by the Statutory Manager only when there was an attempt by the Special Administrator to have FBME deposits held by correspondent banks abroad moved to the Central Bank of Cyprus. Quite rightly, this measure was questioned.

Fact: The Central Bank of Cyprus already holds a large amount of FBME’s depositors’ funds, so why can’t it use these funds to facilitate transactions for clients earlier? This is a question the Central Bank continues to sidestep.

Fact: The Central Bank of Cyprus hides behind the fiction that there are no correspondent banks, while we know there are banks willing to act in this capacity, as we have repeatedly stated.

Fact: While the Central Bank of Cyprus defends its actions in terms of protecting deposits and wanting to sell the branch through an expropriation, its actions have achieved neither end. On the contrary, they have served only to undermine the reputation of the Bank and of the Republic of Cyprus as a place in which to conduct business and, especially, international banking business.

Fact: No one should want to see redundancies and for healthy organisations to be damaged. But the actions of freezing FBME Bank transactions had the immediate catastrophic effect of choking FBME Card Services. Operations had to be suspended and 72 employees had to be let go – a deplorable consequence of the Central Bank of Cyprus’s decision to impose Resolution measures on a branch and by announcing that it wishes to sell the Cyprus branch of FBME Bank.

Perhaps the Central Bank should be commenting on this.

To see the Administrator’s announcement published on Monday, 1st September 2014, click here