Ten BoC ex-directors and execs fined for misleading investors

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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.

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About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]

  • Iron mike

    These directors should be put in prison for the deliberate and misleading way they acted and not only them the bank managers too They knew very well what catastrophe was around the corner but pretended otherwise Shame on them !! They caused untold misery and distress to thousands of people and brought the country to its knees ! What a puny 100k is to these people when they make millions in bonuses and salaries Its quite a pathetic punishment

    • SuzieQ

      And we need to factor in that they probably won’t pay the fines anyway.

  • Barry White

    Surely, these people should be banned from taking up Director roles in the future as they have very amply demonstrated that they are unfit to control other companies or other peoples’ money.

  • Bob Ellis

    what ever happened to their illegal loans, was anybody sanctioned ? wait a minute, this is Cyprus. Swept under the carpet again. Why do no international banks have a presence in Cyprus again ?

  • Kevin Ingham

    To be honest the whole Cypriot banking crisis has blame attached across a pretty wide spectrum.

    The flooding of Cypriot banks with money and the liberalisation of the lending criteria that happened after Cyprus joined the Euro can be partially blamed on lack of EU supervision of the Euro zone and the Cypriot government failed abysmally to regulate the banks themselves

    That’s no mitigation for these guys whatsoever mind you, but when the Chairman of the Bank is also one of he banks biggest customers it should not come as any great surprise when it all goes pear shaped . The fines are of course trivial to these individuals (a slight slap on the wrist at best) and I have no doubt they will move on to the next cash cow to do a bit of milking there as well

    • divadi bear

      ……supervision of the Euro zone……..
      Kevin: It is not the job of the EU to do this work, it’s The World Bank’s job, but I guess they gave up on Cyprus when the Oligarchs moved in ?
      I don’t care what happens. I only keep the half-yearly minimum in a Cyprus Bank to see me through. They can’t tempt me with a slightly higher interest rate than in my home country.
      The German Pension Department refuse to forward my pension to the BoC…….I wonder why 🙂
      I suppose that’s the level of trust Germany has in EU Cyprus Banking System !

      • Neroli

        The banks here now are under the ECB

    • Neroli

      And Aristodemou will probably borrow that €100,000 from the bank and it will become another NPL

  • dave

    ‘were not prepared in accordance with the Companies Law’s

    In the US, shareholders and bond holders law suits would be raining down like confetti

    But then, they have a legal profession and court system that is fit for purpose

    • divadi bear

      What else do you expect when some people in top Government, Civil Service and Banking positions are amateurs ?
      It would be interesting to know how many of those have Diplomas, Experience and Knowledge fit for the jobs and keep up with relevant reports from the rest of the Industrial World !
      No that would seldom happen here. It’s a case of “Who you know and if they are Family” !

      • cyprus observer

        So true.

  • divadi bear

    Use the money from fines to the hundreds of people who lost out on their deposits, with interest !!!

  • Nemisis

    Lets’s be honest (almost impossible in this sphere I am sure), if they went back to 1999, and the Cyprus Stock Market scam, there probably wouldn’t be any bank managers left!

  • Alassia

    Since they managed to ensure their personal finances were protected, well in advance of the crash, a 100,000 euro fine is derisory.