Cyprus Central Bank dismisses Bank of Cyprus board

NICOSIA, March 27 (Xinhua) — The Cypriot Central Bank on Wednesday dismissed the entire board and the executive vice-president of the Bank of Cyprus (BoC) which is at the center of a Cyprus bailout package.

Under a bailout deal endorsed by the Eurogroup on Sunday, BoC will take over the good part of Cyprus Popular (Laiki) Bank along with a 9.2-billion-euro debt which resulted out of emergency liquidity support to Laiki by the European Central Bank.

The dismissal of the BoC board came just 24 hours before banks in Cyprus are expected to reopen on Thursday after a forced 10-day bank holiday which has dried up the economy and paralyzed the market.

There is concern that there will be a run on deposits when banks reopen despite controls which are expected to be announced by the end of the day.

Finance Minister Michael Sarris said the limits on bank transactions would be within the realms of reason and would stand only for a short period of time. He said the aim was to prevent large amounts of money leaving Cyprus.

News that the Central Bank had appointed an administrator at the bank to see through the merger with Laiki caused a protest demonstration by several hundred BoC employees on Tuesday. They gathered outside the Central Bank headquarters and demanded the immediate resignation of its governor, Panicos Demetriades.

BoC Board president Andreas Artemis and four members of the Board resigned in protest at the appointment of an administrator at the Bank, but their resignations were not accepted by the Board.

The state broadcaster quoted informed sources as saying that there was a rift between the government and the Central Bank governor, with the government expressing anger at the way he was handling the crisis.

Demetriades was publicly challenged to resign following criticism that he mishandled issues concerning the banks.

Leading newspaper Phileleftheros (meaning Liberal) said in an article across its front page that the governor of the Central Bank was acting in a spasmodic manner which had caused much damage to the economy and aggravated the situation. It added that his confrontation with President Nicos Anastasiades might deal a deadly blow to the economy and urged him to leave his post immediately.

Demetriades, who was appointed by the previous president just a year ago, is a state officer and under the constitution he cannot be removed from his post unless he is indicted for an offence in the execution of his duties.

Demetriades told journalists at press conference called by the minister of finance in a bid to mollify public criticism that he had no intention of resigning.

“I enjoy the confidence of the European Central Bank,” said Demetriades in response to a journalist’s remark that he is not trusted any more.

Cyprus media have published allegations that the Central Bank affairs are virtually run by a team of troika technocrats who set up office there to oversee implementation of the bailout deal.

The Eurogroup decided on bailout of 10 billion euros but demanded tough measures, including a radical downsizing and restructuring of the banking system, to be applied prior to the final signing of the deal and disbursement of any aid.

Laiki Bank, the second largest lender, will in effect be shut down and accounts of up to 100,000 euros will be transferred to BoC, along with some other assets but also all of its debt.

Deposits of over 100,000 euros in Laiki will be frozen until its final liquidation after several years.

Similar accounts in BoC will be taxed by a yet unknown amount to recapitalize the bank. The finance minister said large deposits total about 9 billion euros and they could be charged with tax up to 40 percent.

Owners of large deposits will receive compensation in the form of BoC equity.

 

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