The operations of all three Cypriot banks – Bank of Cyprus (BoC), Laiki and Hellenic – went to Greece’s Piraeus Bank, which paid around €500 million. The deal went through despite opposition from the boards of BoC and Laiki, which was 84 per cent state owned. Former BoC chairman Andreas Artemis told the House Ethics Committee the deal had been seen through by the Central Bank (CBC) and the finance ministry without informing the lenders of the details, despite their pleas. “The sale was conducted under conditions we did not agree with at all,” Artemis said. “The board refused to sign off on the sale.”
The deal, said the former BoC chairman, allowed Piraeus to demand compensation against certain loans it could deem problematic. Potential obligations that may arise in the futurewere not transferred on to Piraeus and could cost BoC millions, Artemis told MPs. Andreas Phillipou, the state-appointed chairman of Laiki, told the committee that his board also refused to agree to the conditions of the deal.
On Monday, Piraeus reported a net profit of €3.62 billion compared with €46 million in the same period a year earlier. The figure included €3.41 billion goodwill write-back from the Cypriot takeover and a deferred tax asset of €540 million. Excluding the one-off gain, Piraeus said it lost €336 million before taxes. The CBC has said it was enforcing political decisions. The deal had been finalised after the Eurogroup decision in March to resolve Laiki and recapitalise BoC by taking part of the uninsured – over €100,000 – deposits in a process that came to be known as a haircut. The deposits in the Greek branches were left untouched.
The sale was designed to help Cyprus deleverage its vast banking sector, a key demand from the eurozone and the IMF. With their sale, the leverage ratio of Cyprus' banking system (assets/GDP) would go down to around 6.8 from about 8 times. The move also helped to shield Cyprus from potential negative developments in Greece and vice versa. That link, in particular the merger between Laiki and Marfin Egnatia, is widely believed to be one of the reasons for the downfall of the island’s economy.
Michalis Sarris, who chaired Laiki between January and August 2012, told the committee of “strange” loans worth around €4.0 billion. Sarris said the term had to do with the collateral, the people and the interest rates of such loans but was stopped from expounding over concerns that it could hurt potential court procedures. A Greek parliamentary enquiry however had called attention to "serious conflicts of interest" in Laiki's Greek operation. It had loaned money to a community of Greek monks involved in land deals and to others who used the money to support a share sale by Marfin Investment Group, a company linked to Laiki through a shared chairman, Andreas Vgenopoulos, until November 2011. Vgenopoulos denied any wrongdoing.
In a written statement issued yesterday, Vgenopoulos said he was ready to appear before the committee and that all it would take was a phone call from the committee chairman to invite him. “In reality, I not only accept his invitation, but I demand it so that the Ethics Committee stops operating as a forum of unanswered slander and populist utterances,” Vgenopoulos said. The former Laiki strongman charged that it was the members of the island’s political and economic establishment that destroyed Laiki and the economy and were now desperate to shake off their responsibility by misleading public opinion.
Source: Cyprus Mail
