update 25-03-13 - 12-04-13
TRANSCRIPT
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TABLE OF CONTENTS
Latest news ................................................................................................................................................... 2
The slander continues .................................................................................................................................... 2
PIMCO Report ............................................................................................................................................ 2
Alvarez and Marshal Report ....................................................................................................................... 3
AKEL (Opposition; previous presidency) ..................................................................................................... 4
CENTRAL BANK .......................................................................................................................................... 4
DISY (ruling Party) ...................................................................................................................................... 4
The Churchs position ................................................................................................................................ 5
Who were the players? .................................................................................................................................. 5
Andreas Artemis Central Bank of Cyprus ................................................................................................ 5
Panicos Demetriades - Central Bank of Cyprus .......................................................................................... 5
Andreas Illiades Bank of Cyprus ............................................................................................................... 6
Michael Sarris Laiki Bank of Cyprus.......................................................................................................... 6
Andreas Vgenopoulos ................................................................................................................................ 6
Vassos Shiarly ............................................................................................................................................ 7
Other (unsubstantiated) Rumors of Corruption .............................................................................................. 7
The Issues The Judicial Probe ...................................................................................................................... 7
Side Issue 1: Money taken out of Cyprus prior to March 15th
...................................................................... 8
Side Issue 2: Debts forgiven in Laiki ........................................................................................................... 9
Parliamentary probe ...................................................................................................................................... 9
Moving Forward Transparency and Accountability ...................................................................................... 9
Appendix 1 - What the EU wants for the 10bln rescue package .................................................................... 11
Appendix 2 - Findings of A&M report to date ............................................................................................... 12
Appendix 3 - List of 132 Names .................................................................................................................... 14
Appendix 4 - List of Forgiven Debts .............................................................................................................. 18
This reads a bit like a Hollywood movie. I have made no comments since March 25th
so I will endeavor to
summarize events as they have unfolded over the past fortnight. No doubt everyone is as bewildered by the
turn of events as I am. Bear in mind what I state below is simply what has been reported in the news, with
some of my own observations.
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Latest news
A draft assessment prepared by the European Commission, revealed by Reuters on Wednesday 10th
April
2013, now puts Cyprus total financing needs 23bln not 17.5bln as was originally predicted. How? You ask.
Good Question. No good accountants out there? People just cant add perhaps? The EU will only loan us
the 10bln (see Appendix 1 What the EU wants for the 10bln), so we have to come up with the rest. So now
Cyprus has to raise 13bln not 7.5bln to ensure the 10bln from the EU.
What does this means in practical terms?
The move to separate the banks and the wind-up of Laiki and the haircuts from deposits is expected to raise
a total of 10.6bln euros. That still leaves Cyprus with a shortfall of 7bln euros which means that government
will need to dig deeper. The excess will probably come from deposits at BoC, who now stand to face up to
almost 60% haircut to cover this shortfall.
Additional funding will come from increased taxes and there have also been reports that Cyprus may sell a
large portion of its gold reserves in order to raise another 400m euro (pittance in comparison to the overall
amount). This news has decreased gold prices in the last 24 hours in conjunction with the Goldman gold
downgrade and the 17-tonne outflows from the metal's exchange-traded funds.
At current prices, 400m euros' worth of gold amounts to 10.36 tons of metal.
Cyprus' total bullion reserves stood at 13.9 tons at end-February, according to data from the World Gold
Council.
If we sell gold reserves what does that mean if we leave the Eurozone? Less assets to cover our own
currency hence further devaluations of the new currency, and if the government goes ahead and prints more
money, then hyperinflation as the new currency will be worth s**t, well not a lot.
On top of all this were hearing about (additional) rescue packages for Cyprus Airways, Cmon people what is
wrong with this picture. How many millions (more) must we sink into this Airline? No common sense
prevails here.
The slander continuesThe blame for our woes continues to go back and forth between our politicians. If only they could attack theissues we are facing with the same fervor.
PIMCO Report
Pacific Investment Management Company, LLC (commonly called PIMCO), is an investment firm
headquartered in Newport Beach, California, in the United States.
PIMCO was commissioned by the former government to provide a due diligence report on bank
bailout requirements, i.e. their mandate was to assess the recapitalisation needs of Cypriot banks.
The report was completed in February 2013 but the results were not made public.
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The Central Bank of Cyprus said in a statement that the results of the report will be made public
when the Memorandum of Understanding is signed between the Republic of Cyprus and the
international creditors. Since the former President Christofias had stated that he will not sign the
Memorandum, the public would have to wait until after the new president was elected. The report
will be examined by the Steering Committee, who would then take into account the mitigating
circumstances that have been put forward by the banks. Nothing has been released as far as I could
find out.
PIMCOS final figure was 8-10bln. Of course the government and the Central Bank of Cyprus had
strong disagreements with this company too relating to the methodology used.
They were blamed for inflating the amount needed by banks. PIMCO came up with a worst-case
scenario of some 10 billion needed by banks because they estimated the reduction in property
values to be 25 per cent higher than what was agreed in the steering committee. As we seen now in
hindsight, they werent wrong.
In its assessment PIMCO predicted that bank recapitalisation needs were between 8 and 10
billion. Their baseline scenario was 5.98 billion while the worst case scenario was to 8.86 billion.
Their reports suggested Bank of Cyprus would have needed between 2.8 and 3.9 billion, and
Popular Bank 2.7-3.8 billion.
Under the adverse scenario Hellenic would have needed 333 million, while Greeces Alpha bank
would have needed 149 million.
The cooperative banks would have needed between 364 and 589 million.
The macroeconomic scenarios were given to PIMCO by a steering committee, made up of
representatives from the Central Bank, the finance ministry, the cooperative bank supervisory
service, the IMF, European Commission, European Central Bank, European Stability Mechanism,
European Banking Authority, and the European Central Bank. Five of the ten members of the
steering committee were Cypriots.
Alvarez and Marshal Report
The U.S.-based forensics, global dispute and restructuring company, engaged by the Central Bank ofCyprus (CBC) to lead a probe into the circumstances that led two of the nations banks to seek state
support. A&M have been criticized for their report in their failure to address acquisitions by Laiki of
Greek Government Bonds (GGBs). Questions are being raised about the objectives and the terms of
reference set. In response the CBC states that the investigation continues and the report is as yet
incomplete (April 6, 2013), next matters to be addressed include Laiki Banks acquisition of GGBs and
international expansion, along with oversight by the CBC and the status of supervision over the
bank. (See below for Appendix 2 - Findings of A&M leaked report to date).
Another interesting finding by A&M by their forensics IT, is that the computers of two employees of
BoC, (former CEO) Mr. (Andreas) Eliades and (senior manager group treasury and private banking)
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Christakis Patsalides, had wiping software loaded, which is not part of the standard software
installations at the BoC, as reported Cyprus mail April 15th
2013.
The essence though is that report raises more questions than it answers and fails to explain both
banks' excessive exposure to Greek government bonds, nor is there any evidence presented as to
whether the investments were illegal, or just bad investment given the wider problem caused by
Greece's own economic collapse. Incidentally we paid them 250,000 for their services. Hmmm I
wonder if we paid by cheque issued from Laiki.
AKEL (Opposition; previous presidency)
AKEL keeps blaming the current government for the mess were in. They keep insisting that they
have the answer for the economy; I wonder what they were doing for the past five years exactly.
They keep saying throw Troika out, but were they not the ones that invited them here in the first
place? They also advocate get out of the Eurozone. I wonder, have they done any economic impact
studies before suggesting this or does it just sound like a good idea to them.
Do we really need to remind AKEL that during their first, and more than likely ONLY presidential
term, amongst the many disastrous decisions taken two are at the very heart of the economic crisis?
1. The decision to accept the 4.5bln haircut of the government bonds, without any formalized
impact study and
2. The Mari explosion not only saw the lives of 13 people extinguished before their time but also
had massive costs for the Republic.
The EU estimated that the cost of explosion to the island amounted to around 2.4bln, with cost
of the power plant itself coming to 1.5bln, with a reduction to 900mln as insurance covers the
difference. In addition the island has suffered electricity hikes of 18% since 2008 and thegovernment is only now considering reducing electricity bills (up to 8.5%) in light of our crisis.
CENTRAL BANK
I just want to know what the watchdog the central bank and what were they doing to regulating
our banking system. So many laws have been passed in Europe relating to liquidity of financial
institutions, the Basel Accord comes to mind. It wasnt just pretty legislation that was nice to have
on the face of it, it actually needed to be implemented you incompetent sods.
DISY (ruling Party)
What can I say here? We are now faced with a President, apparently an ashtray thrower, (not thebest image for Cyprus) whose promises cannot be trusted. Yes you say he was cornered and not
much choice, I give you that, but I have always believed that where there is smoke there is fire and
his integrity has been called into question on at least three times in his very short serving term
1. On the issue of money laundering his firm was investigated and cleared (wow amazing,
raise your hand those that didnt think that he would be cleared)
2. On the issue of the haircut, where he absolutely and categorically stated that no such
strategy would be acceptable, Mr. President didnt you do your homework before going
to Brussels, and dont blame those around you. The buck always stops with the leader.
(Mr. Christofias you should also take note) excuses like I wasnt advised, I didnt know,just dont wash.
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3. On the issue of knowing that a haircut was possible well this is a funny one, if you
categorically state that you dont accept one, then for you to consider and dismiss it, it
must have been in a list of possibilities that the Troika would have asked for something
along those lines, otherwise why would you even have thought of it so as to deny you
will accept it.
The Churchs position
The church has not been silent. Archbishop Chrysostomos has been actively seeking punishment for
those responsible (he blames the outgoing government, Ministers of Finance, the Central Bank, and
the Executive Directors of Banks) in his words "those that brought the place into this mess, should
sit on the stool." (Na katsoun sto kamni).
The church has lost an estimated 100mln. The church continues to help the poor with outreach
programs and food for the needy. In a surprising move however he held a lunch on March 28th
2013
with the heads of various Russian companies on the island stating I am on your side. Is the
Archbishop making a bid for the next presidency I wonder?
Who were the players?
Am sure there are others I thought these were worthy to note.
Andreas Artemis Central Bank of Cyprus
Former CEO. Fired March 2013.
Citing differences with the central bank in relation
to the recapitalization of the BoC as part of the
Cyprus bailout agreement, He said in his resignation
letter that the Central Bank of Cyprus had
appointed an administrator for Bank of Cyprus
without letting the board know. He further alleged
that the central bank had plans for a recapitalization
BoC ready in January, but did not notify the board.
Panicos Demetriades - Central Bank of Cyprus
Current Governor
Appointed by former president Christofias since May 2012
There have been numerous calls for his removal, but the
European Central Bank (ECB) Mario Draghi (12/4/13) warns
that he cannot be removed for reasons other than those
clearly stated in the EU treaty.
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He refuses to give up his position and reminds the president in his letter, of the independence of EU
central banks, noting that governors can only be dismissed on grounds specified by EU law, which
established only two clear grounds for dismissal, namely if the Governor no longer fulfils the
conditions required for the performance of his duties or if he has been guilty of serious misconduct.
I say use the latter. However he is soon to undergo questioning by Parliament who are investigating
him on charges of misconduct and misrepresentation of banking data (April 12 2013).
Andreas Illiades Bank of Cyprus
Former CEO. Resigned in July 2012
Breaking his silence after nine months, Andreas
Eliades, claimed (April 12 2013) that certain
circles, inside and outside BoC, not only failed to
join forces but they undermined every effort totackle the crisis. Unfortunately, developments
confirmed that it was all part of a well-devised
plan to break up the entire banking sector and especially the Bank of Cyprus, which was in good
financial condition at the time,
Michael Sarris Laiki Bank of Cyprus
Former Chairman. Resigned August 2012
Former Minister of Finance. Resigned after 5 weeks in
office (April 2013)
The reason for his resignation (he says) is to facilitate
the work of the investigative committee, which is
looking into responsibilities for the current crisis as
their remit covers the period when he was President
of Laiki
Andreas Vgenopoulos
Chairman of Marfin Investment Group. Major shareholder of Panathinaikos FC. Owner of 1% of
Marfin Popular Bank and 1,5% of the Marfin Investment Group.
F
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Vassos Shiarly
Former finance minister during Christofias Administration
In March 2013 he stated to CyBC his insight for how we got
here.
1. The excessive zeal to show solidarity beyond our
capabilities to another eurozone country. We should have
put some conditions down, and examined how much our
pockets could take.
2. The other (mistake) is that for consecutive years now we
have created excessive public deficits, that have
accumulated and reached the point where we can no longer take them
Well done Mr. Shiarly my 15 year old could have told you the same thing.
Other (unsubstantiated) Rumors of Corruption
Dont know how true this is but word on the grapevine is the Christofias (former president of Cyprus)
daughter received 2m as a wedding gift from Andreas Vgenopoulos. nope it wasnt bribery it was a gift
people (can you detect a note cynicism in my tone?).
The Issues The Judicial ProbeIn my way of thinking those responsible must be tried and convicted facing serious jail time and concurrently
must have their assets seized from in and out of Cyprus. Unfortunately we all wonder who among them is
without blame as to cast the first stone. We all know what happened with the stock-exchange (crush)
debacle. No one was charged a few people slapped across the wrist and that was that. Lets hope the same
does not happen here.
A judicial probe into how the island was pushed to the verge of bankruptcy has been launched. Three high
court judges have been appointed to oversee proceedings for filing criminal charges against those
responsible . I wish them well and lets hope the enquiry is concluded prior to any of them expiring theyre
not exactly spring chickens. The Supreme Court judges appointed on 2nd April 2013 are:
George Pikis, former member of the
International Court of Justice in The Hague
and former Supreme Court Judge
Panayiotis Kallis; former Supreme Court
Judge
Yiannakis Constantinides; former Supreme
Court Judge
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God bless the granddaddies
Having done a quick search on the Supreme Court of Cyprus website
http://www.supremecourt.gov.cy/Judicial/SC.nsf/DMLSCJudges_en/DMLSCJudges_en?OpenDocument
I find no mention of the above three judges neither under Current Supreme Judges nor under Former
Judges.
Further to the main issue I consider two important side issues that must further be addressed) and people
punished if found guilty. The first is who took money out of Cyprus prior to the agreement with Troika and
the second is the debts forgiven by Laiki Bank for no reason.
Side Issue 1: Money taken out of Cyprus prior to March 15th
6,000 companies and individuals withdrew money from Cyprus up to 15 days before the
controversial Eurogroup decision. The CBC was asked to provide data for the previous year but only
complied for the 15 days prior to the decision. The amounts transferred are rumored to be in the
region of tens of millions.
It would appear that the government had been expecting, or maybe preparing for some sort of
haircut on deposits before the Friday March 15 Eurogroup meeting.
In an interview on Sigma, Attorney-general Petros Clerides said he had been asked on the Friday
morning (15th
March 2013) to prepare legislation regarding a haircut on deposits (prior to the
Eurogroup meeting).
The list included foreign companies transferring large sums of money each day, as well as Cypriots
who bought property but the most disturbing are those who transferred money are prominent
government officials and their family members; worthy of mention are
1. Loutsios Family; the Presidents daughter (Anastasiades) in-laws; some 21mln, however
there is more controversy with this as it involves the acquisition of church land gifted to the
Greek Government on condition to build its embassy. When this did not happen, the Greek
government sought to sell this land among the bidders was the Loutsios Family. The church
has since sought an injunction to the sale reclaim the land on the grounds that the land was
gifted for purpose of building an embassy not for the making of profit by the Greek Govt.
Loutsios and Sons have said that if the sale fails to go ahead the money will be returned to
Cyprus, and they will accept the haircut. Keep watching this space? As reported in the
Cyprus Mail on 5th
April 2013 http://www.cyprus-mail.com/cyprus/land-deal-turn-sour-
kykkos/20130405
More details on deposits exported by Anastasiades family at http://www.cyprus-
mail.com/crisis-probe/crisis-probe-will-investigate-me-anastasiades/20130402
2. See list Appendix 3 - 132 Names Who Pulled Cyprus Deposits Ahead Of "Confiscation Day"
published by Zerohedge 1st
April 2013
3. AKEL; 50mln (not on the list) but confirmed by a former Laiki bank teller (friend of mine)
when he questioned the transfer he was told that he either did it or packed his stuff to gohome there and then.
http://www.supremecourt.gov.cy/Judicial/SC.nsf/DMLSCJudges_en/DMLSCJudges_en?OpenDocumenthttp://www.supremecourt.gov.cy/Judicial/SC.nsf/DMLSCJudges_en/DMLSCJudges_en?OpenDocumenthttp://www.cyprus-mail.com/cyprus/land-deal-turn-sour-kykkos/20130405http://www.cyprus-mail.com/cyprus/land-deal-turn-sour-kykkos/20130405http://www.cyprus-mail.com/cyprus/land-deal-turn-sour-kykkos/20130405http://www.cyprus-mail.com/crisis-probe/crisis-probe-will-investigate-me-anastasiades/20130402http://www.cyprus-mail.com/crisis-probe/crisis-probe-will-investigate-me-anastasiades/20130402http://www.cyprus-mail.com/crisis-probe/crisis-probe-will-investigate-me-anastasiades/20130402http://www.cyprus-mail.com/crisis-probe/crisis-probe-will-investigate-me-anastasiades/20130402http://www.cyprus-mail.com/crisis-probe/crisis-probe-will-investigate-me-anastasiades/20130402http://www.cyprus-mail.com/cyprus/land-deal-turn-sour-kykkos/20130405http://www.cyprus-mail.com/cyprus/land-deal-turn-sour-kykkos/20130405http://www.supremecourt.gov.cy/Judicial/SC.nsf/DMLSCJudges_en/DMLSCJudges_en?OpenDocument -
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Side Issue 2: Debts forgiven in Laiki
Cyprus has forgiven loans to politicians and companies while others are generally being required to pay in
full.
See Appendix 4 - List of forgiven debts
Parliamentary probe
Set up (April 2nd
2013) to will investigate a list of several million euros of alleged loans to politicians and
others said to have been written off by the two banks BoC and Laiki, and made up Cypriot MPs.
After a few weeks from the start of the "investigation" into who pulled their cash out of Cyprus the
parliamentary committee has suspended its probe on, due to the Central Bank not providing the data that
was asked of it.
The Committee asked for Data dating back one year from the March 15. The Head of the Ethics Committeehas stated his disappointment on discovering that the Central Bank had only provided them with data for the
15 days prior to March 15, even though they had asked for a years worth of transfers.
Apparently the reason the central bank limited the list to only those who transferred funds in the two weeks
prior to the Cypriot bank default, is that it would have resulted in a "huge volume of information" -
something the central bank believed the parliamentary committee would never be able to handle.
Was it suspended to cover their own backsides I wonder?? Something smells fishy here.
Moving Forward Transparency and AccountabilityTruth is no-one knows what they are doing. All we know for sure is that the Troika was very harsh and we
were used as a guinea pig nation for a trial and error scenario into economic recovery. Even the top
economists in the EU are now saying that Cyprus was monumental blunder. We know the next few years will
be difficult. We know we will persevere.
We need to do more as everyday people. What we need now more than ever is Transparency and
Accountability from our government. We should not be afraid to make our voices heard. We need to
restore faith in our island as a whole not just the financial services sector. We need to restore certainty from
both inside and outside the island.
Weve been told that tourism numbers have not changed that there have been no cancellations. Hard to
believe that, as most people I speak to that were due to travel to Cyprus are having second thoughts. First,
on the ability for them to receive services from Hotels Restaurants etc., as everyone is closing down and
hotels (some) were unable to complete much needed upgrades or restorations, secondly they are afraid of
access to their funds, even though the capital controls obviously do not apply to foreign banks; most people
outside of Cyprus are not in the know.
As I said we need Transparency and Accountability. We need transparency so that everyone in this country
is able to understand what is going on, and has access to information. So that we are not left in the dark
about the decisions our governments make. Because ultimately, those governments were voted in, torepresent the people and to act accordingly in the peoples best interest, not to act in their own interest. We
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need to hold them accountable for their actions so we, the people, of this nation need to be more pro-
active, and to demand explanations from our leaders.
We begin with our media. We need them to report factual events not news coloured by political agendas.
We need to ensure this time that people are prosecuted and made to pay. So I encourage the media to keep
the public updated. The report/findings from both the judicial committee and the parliamentary committee
need to be made public not to be put in a government drawer and forgotten as with the stock exchange
fiasco, and we need to be updated along the way on the progress of these two committees.
We can no longer afford to sit idly by and let the next person worry about what is happening here or to think
that it will right itself. We cannot be spectators to the events that are going on here and to not react.
Commenting on news events in Social media (as I am doing here) is not enough. We need to get organized.
If you think you cant make a difference think again. Remember CyprusAid? How wonderful was that.
Everyday people getting together for the benefit of each other, without political agendas with only one
common objective: Helping each other.
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Appendix 1 - What the EU wants for the 10bln rescue package
A summary of the conditions for the EU 10bln rescue deal; (the first of many I should imagine)
. Fiscal consolidation and Structural reforms; which can be interpreted as a downing of the financial
services sector and of the government employment sector (i.e. a reduction of employees in the
public service [through natural attrition, so they say])
. Privatisation; in the form of CYTA or perhaps AHK
. An audit of (independent evaluation) of the implementation of the anti-money laundering
framework in Cypriot finance institutions
. A quick agreement on Greek branches of Cypriot banks, essentially a sell-off without the haircut
affecting depositors funds in these branches; this condition is probably to curb further
destabilization of the Greek economy
. Increased taxes (so that we can come up with the shortfall) in the form of
o Increase of the withholding tax on capital income
o increase of corporate income tax rate (from 10% to 12.5%, not yet enacted)o Increase of Special Defense Contribution (SDC) on dividends (from 17% to 30%, not yet
enacted)
o Increase of SDC on interest (from 15% to 30%, not yet enacted)
o Increase of VAT (from 18% to 19% from 14th Jan 2014, not yet enacted)
. Regarding the two Banks
o Laiki to be split into a good bank and a bad bank. The bad bank will be run down over time.
o The good bank will be folded into Bank of Cyprus (BoC) and it will take 9bln Euros of ELA
used Laiki to date with it. Only uninsured deposits in BoC will remain frozen until
recapitalisation has been effected, and may subsequently be subject to other conditions.
o BoC will be recapitalised through a deposit/equity conversion of uninsured deposits with full
contribution of equity shareholders and bond holders. The conversion will be such that a
capital ratio of 9 % is secured by the end of the program.
o The money (up to 10bn Euros) will not be used to recapitalise Laiki and Bank of Cyprus
In return they will
. Provide liquidity to the BoC through Emergency liquidity Assistance (ELA), and lets not forget that in
the last year alone Laiki used up 9bln of ELA funds with absolutely no watchdog on where and how
this money was being used
.
safeguard all deposits below EUR 100.000, (interesting to note that the safeguarding of depositsbelow 100,000 are protected by a European guarantee scheme anyway)
. support us to restore the viability of the financial sector (not sure in what way, shape or form)
. support us to restoring sustainable growth and sound public finances (not sure in what way, shape
or form)
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Appendix 2 - Findings of A&M report to date
As reported in the Cyprus Mail 12th
April 2013
In its report, the firm said that despite the lack of formal documentation, it appeared that the decision
had been driven by the managements desire to deliver net income interest and profit growth.
Based on emails and activity in 2009, it appears that BoC pursued an absolute yield strategy where
they took advantage of selling opportunities to generate disposal gains, especially as reporting periods
approached, the report said.
BoC incurred a 1.9 billion loss because of the write-down towards the end of 2011.
Until 2009, BoC held less than 500 million worth of GGBs but during the first half of the year their
holdings spiked to 1.75 billion (thats 1750 million, i.e. more than tripled).
During 2009, BoC appears to have actively traded GGBs such that by the end of October 2009, BoCs
holding had been divested to around 30 million, the report said.
The lenders GGB portfolio remained at a negligible level throughout November 2009.
In fact, on December 10, 2009, Yiannis Kypri, group chief general manager at the time, informed the
market that BoCs exposure to GGBs had dropped to 100 million.
However, on the same day, BoC started repurchasing GGBs, with its portfolio rising to almost 2.4 billion
by June 2010.
The report said the banks treasury department invested in the highest yielding bonds, including longer
maturity inflation linked paper, which resulted in BoC ultimately suffering higher losses.
BoC became reliant on Treasury profits and its GGB strategy, with the equivalent of almost 30 per cent
of profits before tax coming from GGB related activity, the report said.
The increases in GGB holdings had been approved by ALCO, the committee responsible for market risk
management, but without any documented rationale or evidence to support the levels approved.
The report said there was a dominance of senior executives, particularly CEO Andreas Eliades and
Nicolas Karydas, group general manager risk management and markets, resulting in a culture whereby
senior management decisions were not challenged.
Both Eliades and Karydas were members of the executive decision making committees and those risk
committees designed to monitor the banks activities.
And some of the non executive board members did not have banking experience, exceeded the
allowable credit facilities, and appeared not to have received adequate training to fulfil the role, the
report said.
Karydas holding the dual role of general manager risk management and general manager marketers,
did not constitute best practice and posed potential conflict of interest.
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The inherent conflicts arising from senior executives participation in all major strategic and risk
management bodies, at both executive and board level, possibly prevented these committees from
sufficiently questioning the investment in GGBs and the subsequent decision to maintain the portfolio
despite the deteriorating GGB market, the firm said.
Regarding the lenders risk management processes, the firm said with the benefit of hindsight, there
was clearly an inability to adequately consider the risk associated with the purchase of GGBs, and in
particular there was limited recognition that a default could actually take place.
Alvarez and Marsal said the CBC supervision department was potentially under-resourced, both in terms
of numbers and experience of staff members.
In addition, the frequency and timeliness of sovereign bond holding reports, prepared by BoC and
submitted to CBC, meant that the CBC would not have been aware that BoC significantly increased its
GGB holdings between December 2009 and March 2010, until after the event.
Despite requesting details of the banks sovereign bond holdings, the CBC did not have any formal asset
concentration monitoring in place, the findings said.
As such, BoCs high concentration of GGBs was not in breach of any regulatory limits.
The CBC formally requested information regarding BoCs holdings of GGBs in March 2010, but did not
receive any written response.
The CBC did not follow up on this on a timely basis; the reason for which is unclear, the report said.
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14
Appendix 3 - List of 132 Names published on Zerohedge 4th April 2013 http://www.zerohedge.com/news/2013-04-01/list-released-132-names-who-pulled-
cyprus-deposits-ahead-confiscation-day The first column are names of companies and individuals, the second column shows the amounts withdrawn, the third column
shows the amount withdrawn in the same currency as per the fourth column and the fifth column refers to the date of transfer
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Appendix 4 - List of Forgiven Debts reported on http://www.24h.com.cy/webtvnews24h.html March
29th
2013
The write-offs include:
Written-off loans of specific groups of individuals (Board of Directors members, Senior Executive Managementand Politically Exposed Persons).
Bank of Cyprus
. Hotel Company T.H.E. , controlled by the Progressive Party of Working People (AKEL)-PEO. The total
loan of 2.813.000 was written off on May 2012.
.
The Pancyprian Labor Federation (PEO) was forgiven 193.000 out of a 554.000 loan on May.. Company: From 1.83m loan, 111,000 forgiven
. A company that belongs to the brother of a former minister of the Democratic Party (DIKO). The loan
written off was up to 1.285 million euros ($1.595million). Former MP of the Democratic Rally (DISY), S.H. From 58,000 euro loan, 26,000 forgiven
. Former mayor of a large town: From 105,000 loan, 17,000 forgiven
. Company linked with the daughter-in-law of a DIKO MP: From 625,000 loan, 330,000 written off
. Company of person related to a member of board of directors of Bank of Cyprus: From 839,000 loan, 237,000 forgiven
. Company apparently linked to a former minister: From 708,000 loan, 399,000 written off
. Former minister and official of DISY, T.H. -loan up to 399.000 was written off in 2007 and 2008.
Hellenic Bank
. Company owned by a MP from a smaller party: From 1.65m loan, 543,000 written off.
Cyprus Popular Bank (Laiki):
. A.G., former MP of AKEL-loan up to 39.000 in 2012.
.
Former AKEL MP: 39,000 loan written off
. Former DISY MP: 71,000 loan written off in 2011
. Former DISY MP: 54,000 loan written off
. Company 51% owned by Cypriot politician, appears to have had $5.8m of debt written off
. Former spouse of leading ministry official: 18,500 loan written off
. Company owned by ambassador: 14,000 euro loan written off
http://www.24h.com.cy/webtvnews24h.html