‘Back off’ from FBME sale, € 270 mln moved to BOC

The Central Bank of Cyprus and its appointed administrator have been told to back off from any attempt to sell FBME Bank to any other Cypriot or other lender, suggesting that the arbitration process underway could be producing results and may help resolve an issue that has caused Cyprus more embarrassment than intended.

This follows a similar request last week by the Attorney General who asked members of parliament to refrain from debating the issue, for fear of jeopardising the outcome of the process currently underway.

On Friday night, the Paris-based Arbitral Tribunal of the International Chamber of Commerce advised the Republic of Cyprus not to take any further action with regard to the sale of the Cyprus branch of FBME, or to take more funds from FBME to the Central Bank of Cyprus and to make no attempt to close the branch while discussion is continuing with regard to interim measures to protect the branch.

The Financial Mirror estimates that about 270 mln euros may have already been removed from the FBME balance sheet and placed by the Central Bank in escrow with the Bank of Cyprus, widely rumoured as the potential buyer of the Tanzania-based bank’s local branch.

In recent weeks, some 140-150 mln euros in depositors’ and the shareholders’ money has been removed, while a further 120 mln had been lifted and taken to Bank of Cyprus last August.

Adding insult to injury, although the order came from the Central Bank-appointed administrator, customers and depositors who need access to their own funds are charged a penalty, burdening them with additional costs and unnecessary trouble.

“These people are just causing us harm,” one financial services company official in Limassol told the Financial Mirror.

“We never really understood why FBME had to be placed under resolution and why they are causing us all this trouble. Don’t they realise that we are giving Cyprus a bad name just by telling our clients and associates of this ridiculous situation?” he said.

The Financial Mirror has learned that other legal attempts are also underway that may result in the bank resuming some of its activities, but that all depends on the ongoing process at the ICC. from Attorney General Costas Clerides who said that details might emerge that could harm the case of the Republic and the Central Bank in the courts of Cyprus and at the arbitration hearings in Paris. He had also declined to attend the hearing himself.

In accepting the request, members of the parliamentary committee made clear that it would be re-staged at a later date.

MP Aristos Damianou was quoted in the local press as saying that although the committee did not want to hurt the interests of the state, its decision should in no way be taken as an indefinite postponement.

“On the contrary,” he pointed out, “those responsible for handling the matter will be called, as part of the parliamentary control, to account for their actions, inactions or omissions.”

Damianou added that MPs do not want “… any parliamentary discussion to create an excuse for actions that happened in the past by whichever institution … nonetheless we are concerned about the prior handling (of the FBME case) by leading institutions of the Republic, which could potentially end up costing the Republic several millions”.

Parliamentary sources told the Financial Mirror that FBME Cyprus had not been invited to the hearing. The list included the Central Bank of Cyprus, its Administrator, the Attorney General, the head of Police Financial Crime Squad Mokas, representatives from the Ministry of Finance, and the head of the Cyprus Bankers Association.

Meanwhile, in a separate case, IMSP, the FBME-owned card services company, is monitoring the hearings at the Competition Protection Commission which started last week and the hearings are expected to continue well into March.

The company, that claims a case of collusion by JCC Payment Systems, coincidentally majority-owned by Bank of Cyprus, can still only access EUR 1,000 of their money a day, as their sole account is in FBME Bank, and the Central Bank restrictions on FBME customers are that, currently, only EUR 1,000 can be taken out each working day.

In an interim finding in April 2014, the Commission found against JCC “and others” (its shareholders) for monopolistic practices. It has now called JCC and the other parties to present their defense against its findings.