Bank of Cyprus and Laiki Bank chiefs sacked

Central Bank issues restrictions on accessing deposits and bans transferring funds abroad

A protester atop the fence at the presidential palace during an anti-bailout rally in Nicosia yesterday. Photograph: Yannis Behrakis/Reuters

A protester atop the fence at the presidential palace during an anti-bailout rally in Nicosia yesterday. Photograph: Yannis Behrakis/Reuters

Thu, Mar 28, 2013, 06:53

Michael Jansen

The chief executive and board members of the Bank of Cyprus and Laiki Bank, the country’s two largest, were dismissed yesterday as part of the restructuring programme imposed the EU-IMF troika.

The decision was taken during a meeting between the troika team, finance ministry and central Bank governor Panicos Demetriades. The sackings follow the appointment of administrators to oversee the decision to wind down Laiki and transfer its assets to the Bank of Cyprus along with a €9 billion debt to the European stability mechanism.

Mr Demetriades has been accused of mishandling the highly explosive situation, notably by stating wrongly on Tuesday that the Bank of Cyprus would also be dismantled.

On Tuesday, Bank of Cyprus board chairman Andread Artimis tendered his resignation while the chief executive was summoned to Central Bank headquarters early yesterday and asked to step down. Mr Artimis said he and the board had not been consulted on the sale of the bank’s Greek branches to Greece’s Pireaus Bank for €524 million.

“It is a mistake to throw out all the people who know how the banks work at this time,” said a financial expert. He added that Mr Demetriades, an appointee of the former Communist government, cannot be dismissed without a constitutional amendment.

A source at a viable small bank said: “We are living from day to day, but we have a rush of applications to open accounts.”

Restrictions set to be in place ahead of today’s opening include bans on cashing cheques which can only be deposited in accounts and external transfers except to pay for imports and for fees of Cypriots studying abroad. Credit card spending is limited to €5,000 per person monthly. Fixed deposits can be redeemed only at maturity and travellers can carry no more than €3,000 in cash. The restrictions are due to be imposed for one week initially, but renewal is expected.

The ban on cheques could harm manual labourers and part-time workers who are generally paid by cheque and may not have bank accounts. Shops that pay suppliers with post-dated cheques will have major difficulties.

The limits are designed to stem massive capital outflow, but will not placate resentment and outrage of Cypriots and residents with deposits above €100,000 in Laiki and the Bank of Cyprus. They may see up to 40 per cent of their funds transformed into long-term bonds.

Security measures
Cyprus prepared for the opening of its banks, closed since March 15th, by deploying hundreds of additional security personnel to control crowds demanding their money.

In a bid to placate the public, president Nikos Anastasiades launched a criminal investigation into the collapse of the banks, promising to hold accountable those responsible.

Most Cypriots predict there will be no prosecutions.