10/11/2015 11:05
The Cypriot central bank’s proposal for the transfer of Laiki bank’s management to its creditors points out to many concerns.
Although the supervisory authority does not reject the proposal, it cites some reflection points that subvert the whole rationale of the association of Laiki depositors, whose proposal is supported by political parties.
With a letter to the president of the parliamentary Committee on Finance Nicolas Papadopoulos, the CB Governor Chrystalla Georghadji reiterates that she does not disagree with creditors taking over the management of Laiki Bank’s assets.
However, she calls for the attention of MPs regarding Laiki bank’s investments in subsidiary banks abroad, pointing out that their management should be such that the risk of the supervisors of subsidiaries of banks taking measures is avoided, as this would adversely affect Laiki bank’s value in them.
Both creditors and MPs, requested that any regulation on the matter comes before 01/01/2016 when the new EU resolution mechanism starts operating, which will take over the management of Laiki.
The CB Governor suggests that the provisions of the draft law specify clearly that the general meeting of creditors is made independently from the Law on credit business, because they are combined with provisions of the law on consolidation as decided in the appeal for Laiki, and do not allow a general meeting of creditors.
Mrs. Georghadji proposes that the proposal specifies who will represent Laiki Bank as a defendant in many lawsuits initiated against it by creditors on issues including bond holders and Laiki bank’s consolidation process.
According to the CB Governor, the representation of Laiki Bank should not be assigned in such cases, to defendants.
She recommends that the management of these cases is entrusted to an independent third person, a trustee and then to the administrator to be appointed.
Mrs. Georghadji notes that Laiki bank’s representation should also be clarified in lawsuits or other legal or arbitration proceedings that the Bank has initiated against third persons in Cyprus and abroad.
At the same time, she emphasizes that for the period until the adoption of decisions of the general meeting of creditors, by the court, during which Laiki Bank remains in consolidation, agreements made by the special administrator in relation to the sale of assets remain valid.
The CB Governor also cites a number of legal points that should be considered by the parliament.
As noted, for the period up to the approval of decisions of the general meeting of creditors by the court, during which Laiki Bank remains in consolidation, both the law on consolidation and the European Directive on establishing a framework for the recovery and resolution of credit institutions apply.
She notes that the law on credit institutions’ business has been amended and provides for measures of reorganization, resolution and dissolution of licensed credit institutions.
She adds that the general meeting of creditors should be done regardless of the provisions of the law.
She also stresses that the legitimacy of the proposal should be examined based on the European directive.
Finally, she notes that the parliament should ask for ECB's opinion on the proposal, because existing powers of the CB are affected.
Although the supervisory authority does not reject the proposal, it cites some reflection points that subvert the whole rationale of the association of Laiki depositors, whose proposal is supported by political parties.
With a letter to the president of the parliamentary Committee on Finance Nicolas Papadopoulos, the CB Governor Chrystalla Georghadji reiterates that she does not disagree with creditors taking over the management of Laiki Bank’s assets.
However, she calls for the attention of MPs regarding Laiki bank’s investments in subsidiary banks abroad, pointing out that their management should be such that the risk of the supervisors of subsidiaries of banks taking measures is avoided, as this would adversely affect Laiki bank’s value in them.
Both creditors and MPs, requested that any regulation on the matter comes before 01/01/2016 when the new EU resolution mechanism starts operating, which will take over the management of Laiki.
The CB Governor suggests that the provisions of the draft law specify clearly that the general meeting of creditors is made independently from the Law on credit business, because they are combined with provisions of the law on consolidation as decided in the appeal for Laiki, and do not allow a general meeting of creditors.
Mrs. Georghadji proposes that the proposal specifies who will represent Laiki Bank as a defendant in many lawsuits initiated against it by creditors on issues including bond holders and Laiki bank’s consolidation process.
According to the CB Governor, the representation of Laiki Bank should not be assigned in such cases, to defendants.
She recommends that the management of these cases is entrusted to an independent third person, a trustee and then to the administrator to be appointed.
Mrs. Georghadji notes that Laiki bank’s representation should also be clarified in lawsuits or other legal or arbitration proceedings that the Bank has initiated against third persons in Cyprus and abroad.
At the same time, she emphasizes that for the period until the adoption of decisions of the general meeting of creditors, by the court, during which Laiki Bank remains in consolidation, agreements made by the special administrator in relation to the sale of assets remain valid.
The CB Governor also cites a number of legal points that should be considered by the parliament.
As noted, for the period up to the approval of decisions of the general meeting of creditors by the court, during which Laiki Bank remains in consolidation, both the law on consolidation and the European Directive on establishing a framework for the recovery and resolution of credit institutions apply.
She notes that the law on credit institutions’ business has been amended and provides for measures of reorganization, resolution and dissolution of licensed credit institutions.
She adds that the general meeting of creditors should be done regardless of the provisions of the law.
She also stresses that the legitimacy of the proposal should be examined based on the European directive.
Finally, she notes that the parliament should ask for ECB's opinion on the proposal, because existing powers of the CB are affected.
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