Deposit haircut “could have been averted”, says Orphanides

Former Central Bank Governor Athanasios Orphanides is back in town, giving testimony in parliament over the banking crisis, saying that the Christofias administration could have averted the haircut on deposits and that important facts were withheld from the successor government.

Orphanides drew the ire of the opposition AKEL party that grilled the former centralbanker over his statements, as he also blamed officials at the Central Bank for allowing the sale of the Cypriot banks’ branches in Greece, resulting in the collapse of Laiki, and the near-meltdown of Bank of Cyprus and Hellenic.

He said that the AKEL administration and his successor, Panicos Demetriades, purposely inflated numbers as regards the bank’s capital needs, maintaining that the communist party only wanted to blame the banks for the economic collapse.

“The haircut could have been averted even as late as the first days of the newly-elected Anastasiades government, the sale of Cypriot banks’ branches in Greece to Piraeus Bank had been planned months in advance, the PIMCO report had been guided, and the Central Bank of Cyprus, as well as the European Central Bank, had been aware that providing Laiki with emergency liquidity [ELA] was illegal, at least during the last months of its existence.”

“The CBC’s actions in the months leading up to the March 2013 meltdown are of crucial importance, because they inflated the banks’ supposed capital needs,” he said.

“At the end of June 2012, when the government realised that an adjustment programme was inevitable, it falsely claimed that it was necessary only because of the bad shape of the banks. The point is that, by bloating the capital requirements figure to EUR 10 billion, we left the Troika with no options other than a haircut,” Orphanides said. The House Ethics Committee will resume next Tuesday with further statements by Orphanides.