Depositors with what was formerly the island’s second biggest bank who have seen their money disappear overnight, say they want direct control of their 18% of allocated shares in the Bank of Cyprus (BoC). “We have a fundamental right to handle that 18% which belongs to us,” said Adonis Papaconstantinou, the chairman of SYKALA, the association of Laiki Bank depositors.

His statements follow those of politicians who have called against any real or apparent Central Bank control in the Bank of Cyprus, which up until Tuesday was still under the regulator’s administration. As part of the island’s bailout agreement, authorities have been forced to shut the island’s second biggest bank, Laiki, and place BoC, the biggest, under administration.

The Central Bank handed over the BoC to a transitional board on Tuesday, after a decision was finally taken on how much of the bank’s uninsured deposits would be raided in order to recapitalise it, in return for shares in the new BoC. Laiki bank – now under resolution – has been allocated about 18% share capital with those shares to be sold some time in the future, with the money going to the former Laiki’s uninsured depositors. SYKALA said on Wednesday it should only be they, the Laiki depositors, who get a say in how their share capital is handled. At the very least, this should mean a substantial presence in the BoC board, Papaconstantinou said.

The former Laiki has become BoC’s biggest shareholder, and is the only shareholder with more than 5.0% share capital in the BoC, the Central Bank has said. But Laiki remains under the control of an administrator appointed by the Central Bank, who is to oversee a liquidation process with Laiki trying to recover as many of its assets as possible and reimburse depositors.

“Under no circumstances must the impression be given that the state is directly or indirectly involved in administering the BoC, via the Laiki bank administrator,” contender for DIKO presidency, Nicolas Papadopoulos, said on Wednesday. “The first and last word on the [BoC’s] future belongs to those who paid the price and not to those who imposed the haircut and led the banking system to destruction,” Papadopoulos said.

Papadopoulos and ruling party DISY have submitted a bill in parliament to make the finance minister have joint responsibility in implementing the bank resolution law that passed in March, laying out the terms for Laiki’s resolution. The head of ruling party DISY, Averof Neophytou urged parliament on Tuesday to vote the bill through in September “so the Resolution Authority would not be defined as the Central Bank governor and only him”.

Finance Minister Harris Georgiades conceded there was an issue on how the voting rights would be exercised and by whom, while the old Laiki bank is under the terms of the Resolution Law. "I share concerns that the person acting as an administrator should not have unlimited authority in handling the voting rights yielded by [Laiki’s] shares without instructions by those who would be the shareholders,” he said. Georgiades suggested that the resolution process be evaluated to take into account any lessons learned over the past few months.

The Central Bank governor, Panicos Demetriades, has been a divisive figure in parliament with the House Ethics Committee only recently agreeing to drop a probe into allegations he had misled them over the mandate of an investigation into the circumstances under which the BoC and Laiki asked for state aid last year. Despite the closed-door session decision being described as “unanimous”, there have been individual voices of disagreement against the decision.

Where politicians and ministers suggested, rather than outright stating, they mistrusted Demetriades, SYKALA’s Papaconstantinou has been direct. “We are worried the Central Bank will continue controlling the BoC via [Laiki’s] administrator.” He added, “We do not want the administrator or the Central Bank to handle the 18% [share capital].” Laiki depositors saw their uninsured deposits of over €100,000 enter limbo when the bank shut down. Papaconstantinou said that money is “on loan”. “It is very important that the BoC we now have is handled I the best possible way.”

Source: Cyprus Mail