By Stelios Orphanides
The Cyprus Securities and Exchange Committee (Cysec) has fined ten former Bank of Cyprus directors, executives and the lender itself for failing to adequately report provisions for loan impairments in 2011.
The financial market’s watchdog decision, announced on Friday, “is based on the findings of Cysec’s long-term investigation into the company’s activities preceding the financial crisis and the circumstances which arose in the company and that of the Cyprus banking sector’s subsequent depositor bail-in in 2013”, the financial markets supervisor said.
Cysec fined former Bank of Cyprus chairman Theodoros Aristodemou and former chief executive officer (CEO) Andreas Eliades €100,000 each, the two former deputy CEOs Yiannis Kypri and Yiannis Pechlivanidis, and former chief financial controller Christos Hadjimitsis €70,000 each. The former director and chairman of the bank’s audit committee Stavros Constandinides was fined €50,000.
Former members of the board and the risk committee Costas Severis, Giorgios Georgiades, Irene Karamanou and Manthos Mavrommatis got a €30,000 fine each, while the bank, which in 2013 resorted to converting almost half of its customers’ uninsured deposits into equity, received a €15,000 fine.
The commission said that the largest Cypriot lender’s consolidated financial statements in 2011 “were not prepared in accordance with the Companies Law, and in particular under IAS (International Accounting Standard) 39, because it did not make any further provisions for loan impairments of at least €362m”.
These unreported losses amounted to €198.9m in provisions for the bank’s portfolio in Cyprus, €121.8m for the Greek portfolio and €41.3m for the portfolio in Russia and Ukraine, CySEC said.
“The company should have disclosed an equity decrease of at least €362m, reducing its overall capital adequacy –a key tool of the company’s financial and operational sustainability– from €2.3bn to at least €1.9bn,” CySEC said.
CySEC chairwoman Demetra Kalogerou said that the probe was part of a thorough investigation into Bank of Cyprus’s actions ahead of the banking crisis.
“Bank of Cyprus and its former directors failed to adequately disclose the true nature of its clearly worsening financial position in 2011, which had a direct and negative impact on the course of the unprecedented banking crisis in Cyprus in the years that followed,” she was quoted as saying. “The company’s management had a fiduciary responsibility to ensure adequate provision for bad loans – a fundamental accounting procedure which they did not uphold.”
CySEC decided not to fine then board members Andreas Artemis, Vasilis Rologis, Christos Mouskis, Costas Hadjipapas, Nikolaos Tsakos, Anna Diogenous, Evdokimos Xenophontos and Elias Neocleous, on the grounds that did not participate in the bank’s audit committee.