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Central Bank goes on the offensive
THE CENTRAL Bank of Cyprus (CBC) last night launched a scathing attack against the so-called protectors of the “bankers of the past”, accusing its critics of running scared from the expected results of an ongoing probe into the circumstances that led the nation’s two biggest banks to seek state support.
In an announcement issued last night, the CBC said: “In recent days, various coordinated and synchronised reports have seen the light of day about the state of the banking system in Cyprus.”
It continued: “A small group of people is trying to misinform the public, appearing as defenders of the bankers of the past, presenting an unrealistic and misleading picture that the banking system in Cyprus until the end of April 2012 had no problems, that everything was well-planned with the correct ‘actions’ taken at all levels and then suddenly, from the start of May 2012, a conspiratorial plan to smear the banks’ good name began aimed at skilfully ‘inflating’ non-performing loans in the banking sector.”
The reference is a clear dig at former CBC governor Athanasios Orphanides and his supporters who have dished out copious allegations of incompetence against the present government.
In a recent interview with the Sunday Mail, Orphanides suggested President Demetris Christofias torpedoed last-ditch efforts undertaken by his finance minister to avoid a bailout in April and May of 2012.
More recently, critics of the government have also argued that the incumbent CBC governor Panicos Demetriades failed to negotiate with the troika a gradual recalculation of the banks’ non-performing loans so that the banks’ recapitalisation needs do not rocket overnight.
However, the present CBC leadership pulled no punches in yesterday’s announcement, defending its corner with vigour.
It noted that the real state of the economy has been documented repeatedly by international credit rating agencies and most recently in the provisions of the Memorandum of Understanding with the troika.
“The situation, unfortunately, cannot be dressed up. The banking sector will necessarily be consolidated, restructured and recapitalised in order to regain strength and to once again play its role in economic growth,” said the Central Bank.
It added that the supervisory authority will play an interventionist role for the benefit of depositors, shareholders, investors and the Cypriot public in general, while consistently putting special emphasis on issues of corporate governance and transparency.
“The CBC looks ahead with optimism for the future, while simultaneously taking care to identify the mistakes of the past so they cannot be repeated,” it said.
Part of this effort to avoid a repeat of past errors is the independent investigation conducted by US-based firm Alvarez & Marsal- hired last August to identify how the island’s largest banks ended up needing billions of euros in bailout money- and the Independent Committee on the Future of the Banking System.
“It is obvious that those affected have started from now to worry about the results of the above two investigations and it is for this reason that they desperately try to politicize everything, especially during the current election campaign period in an effort to disorientate the public,” said the CBC.
In a separate announcement, released a little earlier in the evening, CBC spokeswoman Aliki Stylianou said the supervisory authority had yet to select a consultancy firm to verify a due diligence review of Cypriot banks carried out by investment company Pimco.
Pimco has already released an interim review; its full report is scheduled to be delivered by January 15, six days before the next meeting of euro-area finance ministers. The interim report was submitted to a steering committee comprising potential lenders and Cypriot authorities.
In the meantime the Central Bank, a member of the steering committee, asked that a consultancy firm review and verify the methodology used by Pimco before January 15.
Following a tender selection process, the name of the consultancy was expected to be revealed yesterday.
“As soon as the process is finalised the name of the selected firm will be announced,” said Stylianou.
Meanwhile both online financial news site Stockwatch and state broadcaster CyBC yesterday named BlackRock as the external firm likely to get the contract.