Those Questions Which Come Back to Haunt

31 October 2014

 The legal fightback in the international arena by the owners of FBME Bank against the hostile and illegal takeover of its Cyprus branch by the Central Bank of Cyprus is underway. The latest act has been the completion of the filing in Paris of the shareholders’ case for arbitration with the International Chamber of Commerce. Now the Central Bank will have to justify its actions in an international forum.

So, it has become time to revisit those questions raised about the actions taken by the Central Bank that it has so far declined to answer.

The first of these is why the Central Bank of Cyprus ever thought its Resolution Decree was fit for purpose? The decree is designed for a bank that lacks the funds to pay back its depositors, or in other words, a bank going bankrupt. That wasn’t and still isn’t the case with FBME Bank, which meets all international solvency, liquidity and other prudent banking ratios.

This was a flagrant abuse of the Decree, used to expropriate a financial institution.

Why did they pick as the Administrator to run FBME a man who had a business relationship with a financial services company seeking a banking license in Cyprus? Surely they saw the potential for a serious conflict of interest – as did Mr. Christofides himself when he abruptly resigned from the company a week into his time as FBME Administrator, and even backdated his resignation. Of course, he continues to own a company which provides corporate services and advice to banks. We question whether it is acceptable for him to serve so many different masters.

Why did the Central Bank’s Administrator take five weeks to start providing depositors access to their funds?

Why, when he did, was this facility available in amounts up to EUR 10,000 a day and only to those who could be here in Cyprus?

Why are so many accounts still frozen? The only reason for this given by the Central Bank of Cyprus’s Administrator is compliance issues – whereas the compliance people have not found such issues. So did he just make it up?

Why were letters sent to banks holding FBME deposits telling them to transfer those funds to the Central Bank of Cyprus? Was the Central Bank commandeering the money, too?

Why, if the original plan was to protect depositors, has there been no road map to an orderly return to standard banking procedures?

How long is the Administrator’s mandate to pay himself from FBME Bank funds? He pays himself for a full working week though he has days off without explanation and is invariably gone by 3 pm.