21 November 2014
Four months of mismanagement have really shown up the incompetence of the Central Bank of Cyprus’s attempts at banking. Whatever is felt about its skill at operating as a banking supervisor, it is evident that it can’t successfully run a bank. What else can you expect when auditors, accountants, economists and entrepreneurs – not a professional banker among them – are in charge?
They have irresponsibly allowed the liquidity of the Cyprus branch of FBME Bank to run down and have unmistakably failed to cooperate with the Bank of Tanzania (FBME’s home supervisor) and FBME Limited. The activity of the Administrator is causing yet more damage to FBME’s customers and to FBME itself. Many of his actions have allowed customer relationships and faith in the banking system in Cyprus to deteriorate. And the Central Bank has done all this without permitting the branch to maintain and rebuild its business.
As we know, this unedifying spectacle is also storing up much harm for the Republic of Cyprus. There are already writs and compensation claims from numerous entities flying in the air that should keep the courts busy for years. We said it before; when you’re in a hole and want to get out, the first step is to stop digging.
Given that what we have witnessed is the expropriation of someone else’s business, we wonder how those hardworking folk at the Cyprus Investment Promotion Agency, and anyone thinking about making their own investment, will view these actions.
The key has been the fiction that FBME Bank’s correspondent banking arrangements have collapsed, when they haven’t. It is worth reminding ourselves that in the very few attempts the Central Bank has ever used to defend its measures (8 August, 28 August, 1 September 2014, copies can be supplied), it has cited the lack of correspondent banking as the reason for its actions.
The whole raison d’être for the Central Bank of Cyprus’s policies towards FBME’s Cyprus branch has been invalidated. Unless there is now an attempt underway purely to destroy the Cyprus branch of FBME, the mismanagement of this episode is legendary. The proposed disposal of the FBME Cyprus branch is well past its sell-by date; the protection of depositors has been exposed as a fiction, and the prospects of a grab for someone else’s investment plum have all gone. There will be books written about this for decades.
The poor understanding of banking systems by the Administrator and the senior officials of the Central Bank means that it is time they go. They need to move out of the way and allow professional bankers – the management, staff and directors of FBME – to start doing their jobs once again to restore faith in FBME and trust in Cyprus.
