Finance Minister Harris Georgiades bears the biggest responsibility for the failure of the Cyprus Cooperative Bank, the Committee of Inquiry on the failure of the CCB said on Wednesday.
The CCB, Cyprus second largest lender which was bailout by the state in 2013 and in 2015 with €1.7 billion, was split between a bad bank and a good bank, with the latter sold to Hellenic Bank, which paid the state with €74 million and received a balance sheet of €10.3 billion.
«The Finance Minister bears the heaviest responsibilities for the failure of the Cooperative Credit Sector (CCS). We could say that (his responsibilities) are proportionally similar to those of a big shareholder in private company, which failed due to his mismanagement,” the Committee said in an 844 page-long report which was made public today.
The CCB failed to reduce its huge burden of non-performing loans despite warning by the European Central Bank and the local regulator, the Central Bank of Cyprus. After an on-site inspection by the Single Supervisory Mechanism (SSM), the CCB reported a provisioning gap of €816 million, prompting the state to sale its performing operations to Hellenic, while creating a state-owned asset management company to wind down the CCB NPLs. However, the state was forced to pay €3.5 billion to shore up the balance sheet sold to Hellenic, of which €3.2 billion in bonds.
“The Finance Minister very early had repeatedly, and sometimes strict, warnings both by the Cypriot regulator but mainly by the European regulators on the CCB’s very poor and weak corporate governance. However, he did nothing,” the report added.
The Committee also laid blame to the President of the Republic Nicos Anastasiades for not removing Georgiades from his post.
“If the President bears some responsibility for the all those that lead to the expedited sale of a part of the CCB to Hellenic Bank is because he maintained to the Finance Ministry a person which for a period of more than four years, did not manage to lead the CCS out of its destructive course.”
Furthermore, the Committee apportions to the CCB’s General Director, Nicolas Hadjiyiannis “huge responsibility,” noting that “despite repeated calls by the supervisory authorities, both by the Central Bank and the SSM, on above issues (reducing NPLs and slashing operating expenditure) the General Director show negligence and incompetence to tackle them.”
Moreover, the Committee suggest that Hadjiyiannis should be subject to civil and criminal inquiry concerning a possible breach of contract and the deal with Asset Manager Altamira concerning the management of the CCB €7 billion NPL portfolio.
The report also suggests that Yiannos Stavrinides should also be subject of investigations concerning advertisement contracts.
Harris Georgiades has been accused that Hadjiyiannis and Stavrinides have been appointed to key positions in the CCB because they were his personal friends.
Moreover, the Committee said the CBC had part of the responsibility which could have impacted the developments in the CCB, although it acknowledges the CCB’s letters pointing out the problems of the CCB.