26 March 2015

Much has been revealed in the last couple of weeks that we didn’t know before thanks to flurries in the media, resignations from the Central Bank and the outcomes of official investigations. For the first time in a real sense, light has been shed on the circumstances of last July’s draconian imposition of Resolution measures on FBME bank’s Cyprus branch and the string of consequences of that decision.

As revealed in the resignation note issued publicly by Stavros Zenios in stepping down as a CBC Director on 20 March, he found himself in opposition to the CBC, its Governor and Executive Directors in respect to their actions directed at FBME and its Cyprus branch. In this resignation statement he wrote, “I resigned because of the rejection of my written suggestion made on 28 July 2014 that an internal investigation should be conducted in relation to the case of FBME.” He added, “The Executive Directors jointly with the Governor took all the decisions about how to deal with FBME and I am extremely concerned about their handling of the matter.” (Mr Zenios also quoted other reasons for his resignation it should be understood.)

It is clear that these Resolution measures, taken against one of the world’s healthiest banks*, were hasty, inappropriate and possibly illegal. They have placed the honest and unsuspecting Government of the Republic of Cyprus and its taxpayers in the frame for footing potentially massive bills for compensation. There are other victims of the CBC’s actions, who include depositors, investors, businessmen, and employees of third party companies and their families. Most latterly, we have heard from the staff of the Central Bank about how they, too, have been affected by the storm of controversy surrounding the institution.

Mr Zenios, let it be remembered, is a senior member of Transparency Now and has acted to explain a little of the circumstances surrounding CBC’s decisions in regards to FBME, for which we have been long calling.

His fellow member of the CBC Board of Directors, Stelios Kiliaris, also resigned, announcing his departure on 12 March. Apart from being on the Board, he was a member of the three-person Resolution Committee. Surrounding his resignation were accusations and counter-accusations made about several major players, which included a revelation that was reported by the media that minutes of CBC Board meetings were not always kept in full. If there is a desire for greater transparency then putting that right seems like a good first step.

There have actually been three significant resignations this month. The earlier one, announced on 2 March, was by Andri Antoniades, the Special Administrator of Laiki Bank appointed by the CBC to resolve matters at that institution. Again this spurred a flurry of allegations and claims, none of which reflected well on the performance of the CBC which is supposed to be an independent and objective arbiter of the financial system in the Republic.

Small wonder, then, that on 19 March employees of the CBC staged a one-hour strike calling for improved standards of behavior within and with regard to the Central Bank. Most of these people are hardworking, skilled and diligent servants of the State and the public good, and do not deserve for their reputations to be traduced by whomever is set in positions of power. Like the rest of the people of Cyprus they deserve proper transparency and convincing explanations.

Transparency is the operative word in this context. If there had been a willingness by the CBC at the outset to explain the actions of the Resolution Committee and its Administrator, it is unlikely that matters would have degenerated in the way they have. Likewise, had the CBC washed its laundry in public much earlier it would have been much less painful and possibly less costly to it and the Republic.

*Footnote: it is now believed that in terms of liquidity, FBME had one of the healthiest ratios of any bank in Europe. It was a juicy plum.