http://www.cyprus-mail.com/board/majority-cbc-board-resigns/20130413
Former finance minister Michalis Sarris
Majority of CBC board resigns
By George PsyllidesPublished on April 13, 2013
THREE Central Bank of Cyprus (CBC) board members resigned yesterday, in what could only be interpreted as a motion of no confidence in the governor who has been under fire over his handling of the banking debacle.
Demetriades claimed the CBC’s independence was being attacked by the government while at the same time his family was being threatened by people who lost money in the crisis.
The three members, Haris Ahniotis, Andreas Matsis and Louis Christofides, quit the seven-member board, leaving Governor Panicos Demetriades alone with one remaining member.
Another member resigned a few months ago while the government recently rescinded the appointment of Sypros Stavrinakis to the post of deputy governor.
The CBC has no executive powers but yesterday’s resignations can ne interpreted as a motion of no confidence to Demetriades who has been under increasing pressure to resign over his handling of the banking crisis.
None of the members made public the reasons for their resignations although reports said that Ahniotis and Matsis were displeased with the largely ‘ceremonial’ role of the board.
One source however suggested Demetriades had asked the board to approve hiring Stavrinakis as his adviser but they refused.
The pair’s resignations could be linked with that, the source said.
Demetriades has been under fire over his handling of the banking crisis, which some believe had been exacerbated by his actions.
In an interview with Bloomberg, Demetriades accused the government of attacking his institution’s independence.
“The independence of the central bank of Cyprus is being attacked at this time,” Demetriades said in an interview in Dublin.
His ability to manage the situation being made more difficult by “death threats not only to myself, but toward my children and my wife,” he said.
“The government seems to have committed to a sale of state gold without consulting the CBC,” Demetriades said, adding there has been “constant interference in relation to the management of the banks under resolution.”
Parliament has said it will examine his actions mainly over an investigation into the banks.
Some accuse the governor of misleading parliament regarding the mandate of the investigation by Alvarez and Marsal (A&M) into the activities of the island’s two biggest banks which have led Cyprus to the brink of bankruptcy.
His critics argue that the A&M investigation was restricted mainly to investigating the Bank of Cyprus rather than Laiki, despite parliament being told otherwise in a letter sent by Demetriades to House President Yiannakis Omirou last November.
http://www.cyprus-mail.com/cyprus/sarris-law-draft-was-haircut-deposit-interest/20130413
Sarris: law draft was for haircut on deposit interest
By George PsyllidesPublished on April 13, 2013
Former finance minister Michalis Sarris
FORMER finance minister Michalis Sarris yesterday sought to set the record straight regarding a controversial deposit haircut bill, saying it was in fact legislation to tax gains from interest.
The bill however did include a condition to tax part of deposits if the capital was withdrawn before the end of the year, he told reporters.
The issue came up after Attorney-general Petros Clerides revealed he received instructions from the finance ministry on the morning of March 15 to prepare a bill concerning a haircut on deposits.
Late that day, the Eurogroup decided to tax depositors as part of the island’s bailout deal.
The opposition accused President Nicos Anastasiades of knowing about the haircut, a charge he categorically denied.
Anastasiades also demanded to know who had instructed the attorney-general to prepare the bill.
Sarris, whose official reason for resigning ten days ago was to facilitate an investigation into the bank debacle, said yesterday that the bill focused on taxing gains from interest.
But there was a safeguard “to tax part of the deposits if the capital was withdrawn before the end of the year,” he said.
Cyprus’ proposal was for a 50 per cent tax on the interest collected from deposits.
And to prevent people from withdrawing their money, a provision had been included that if any deposits dropped below 70 per cent, then the interest, or 2.5 per cent, would go to the government in the form of tax.
“This is where the confusion was,” the former minister said.
“All officers had general instructions that the necessary bills must be prepared,” he said. “This was our general direction, without accepting a haircut, but be prepared with alternative solutions.”
Sarris said that from the beginning, despite the reports and the insistence of the IMF and Germany on some sort of depositor participation in financing the bailout for Cyprus, “we were strongly against and were trying to find alternative solutions with the help of the European Commission.”
Sarris said Cyprus believed €3.0 billion would be enough but the IMF and Germany insisted on €6.3 billion.
The first Eurogroup decision on March 15 called for a tax on all deposits – 6.7 per cent on those under €100,000 and 9.9 per cent on anything over that amount.
“I believe if the agreed solution had been adopted things would be much better,” Sarris said.
Without having a plan B, parliament rejected the decision, prompting a lengthy bank closure and a new scheme, which called for the resolution of Laiki and a haircut on uninsured Bank of Cyprus deposits – over €100,000 -- that could reach 60 per cent.
Sarris described the developments as an assault of seismic proportions on the island’s banking system, which meant that growth rates in the next two to three years would be extremely negative.
http://www.cyprus-mail.com/ailing/deal-clinched-save-cy/20130413
Deal clinched to save CY
By Stefanos Evripidou and Poly PantelidesPublished on April 13, 2013
TOPIC TAGS
ailing, Cyprus, Cyprus Airways, rescueRELATED CONTENT
LENGTHY NEGOTIATIONS on the future of the ailing national airline Cyprus Airways (CY) between the government, CY board and unions ended in agreement last night, giving the airline a glimmer of hope for the future.
Attempts to broker a deal on a government proposal to restructure the company resulted in a compromise agreement last night at the labour ministry, involving the unions, ministers of labour, commerce, and communication and the finance ministry’s permanent secretary.
After lengthy negotiations, the various stakeholders agreed to offer a redundancy package for 490 members of staff, from the 560 earmarked in the original restructuring plan for the airline.
Agreement was also reached on providing redundancy compensation for the 490, with the level concluded at 50 per cent of the compensation paid in the last redundancy plan.
Redundancies will take effect from January 1, 2014, while payment will be divided in to six installments during a three-year period.
CY staff have seven days to register an interest in a redundancy package, though the airline’s management will have the final word on redundancies.
Regarding the airline’s provident fund, €6m will be covered by a general finance ministry plan on provident funds, while the remaining €12m will be covered through the sale of CY property.
The payroll will also be reduced by 17 per cent in total. CY chairman Stavros Stavrou said the company has already introduced a 9 per cent cut, meaning an extra 8 per cent cut will now be implemented.
All pilots will receive a horizontal pay cut of 17 per cent while the remainder of the staff will see staggered wage cuts, starting from 7 per cent for those earning under €1,000, going up to 20.5 per cent for high-earners.
With last night’s agreement, CY could now “spread its wings”, said Stavrou.
Labour Minister Zeta Emilianidou said CY would continue to exist, thanks to the agreement.
Pilots’ union PASYPI head Petros Soupouris said following last night’s deal on implementation of the restructuring plan, CY could continue flying, taking its 65 years of operation to 100.
Before the deal was reached, government spokesman Christos Stylianides repeated the government’s position yesterday that the restructuring was necessary for the national carrier to stand a chance at finding a strategic investor to potentially take it off the state’s hands.
“If we do not meet this condition (for restructuring), unfortunately we cannot move onwards,” Stylianides said.
With the exception of the pilots’ union, PASYPI, who have accepted the restructuring proposal, most of the other CY unions had taken issue with some of the terms. Measures – based on a draft plan by Air France Consulting – include cutting staff by 560, across the board salary reductions of 17 per cent and reducing the fleet size.
All employees need to agree to the proposal, if it is to go through.
Under the original measures before last night’s agreement, staff were not due to get redundancy compensation.
Communications minister Tasos Mitsopoulos said that the European Union would not allow them to offer redundancy compensation, but that even if they wanted to ignore EU regulations and compensate staff to the tune of an estimated €30 million, the government did not have the money. Any redundancy compensation would be investigated by the European commission who is looking into whether previous state assistance complied with EU rules.
The European Commission is investigating the government’s multi-million assistance granted to CY over years, and has said the government can give no more help without prior approval.
CY has post a loss of close to €80 million in 2011 and 2012.
http://famagusta-gazette.com/moodys-downgrades-bank-of-cyprus-deposit-ratings-p18955-69.htm
The governor of the Central Bank of Cyprus, Panicos Demetriades, has claimed that the government is attacking the Bank's independence at the same time as his family endures death threats from people who suffered a loss on their deposits..
In an interview in Dublin with Bloomberg, Demetriades said his ability to manage the situation is being made more difficult by death threats not only to himself but toward his children and his wife.
He also said that the government has committed to a sale of state gold without consulting the central bank and added that their is constant interference in relation to the management of the banks under resolution.
Demetriades claimed that the government had not right to remove the deputy governor, Spyros Stavrinakis, from his post.
The post of the deputy governor of the Central Bank is reserved under the Constiturion for a Turkish Cypriot and his appointment by the previous government was made by invoking the law of necessity.
Two members of the central bank’s board, Andreas Matsis and Haralambos Akhniotis, resigned in recent days and a third board member, Louis Christofides, submitted his resignation on Thursday.
http://famagusta-gazette.com/spokesman-no-additional-needs-for-cyprus-beyond-those-agreed-with-troika-p18945-69.htm
Cyprus’ Ministry of Finance announced Friday amendments on the sixth decree on capital controls.
The Ministry said that legal entities and individuals are allowed only to make payments of up to €300,000 to other financial institutions, but transfers are not allowed.
As a result, individuals and legal entities are allowed to transfer €2.000 and €10.000, respectively, to other financial institutions, once a month.
Furthermore, the Ministry said that only existing customers of a credit institution are allowed to open a new account.
http://www.testosteronepit.com/home/2013/4/12/the-gloriously-ballooning-bailout-bedlam-of-cyprus.html
http://famagusta-gazette.com/moodys-downgrades-bank-of-cyprus-deposit-ratings-p18955-69.htm
Moody’s downgrades Bank of Cyprus’ deposit ratings
Moody’s credit rating agency downgraded on Friday Bank of Cyprus deposit ratings to Ca, negative outlook, from Caa3. .
Moreover, they downgraded senior unsecured debt ratings to C, from Caa3 while the agency confirmed Hellenic Bank’s deposit ratings at Caa3 with a negative outlook.
The subordinated and junior subordinated debt ratings of BoC have been affirmed at C. Hellenic does not have any rated debt outstanding.
Actions reflect, according to the rating agency, their expectation of material losses for BoC creditors in the coming months, and the risk of potential losses for Hellenic Bank in the coming years.
Explaining the rationale behind the downgrade of Bank of Cyprus’ deposit ratings to Ca from Caa3, Moody’s say it reflects their expectation of sizable losses to uninsured depositors in the coming months.
Based on Moody’s view that BoC’s capital deficit will widen following recent events and the subsequent deterioration in the operating environment, the rating agency expects that losses to BoC’s depositors to sufficiently recapitalise the bank will be sizable, but will likely not exceed 65%.
On the confirmation of Hellenic Bank’s deposit ratings, Moody’s say it reflects their view that the Caa3 rating level captures the risk and range of any potential losses to Hellenic’s depositors.
It is added that Hellenic’s stronger capital buffers have enabled it to maintain its private ownership, and avoid being subject to Cyprus’ recently adopted bank resolution framework.
Moody’s note however that the bank will require significant additional capital in the coming years, owing to the acceleration in asset-quality deterioration following recent events.
Although the rating agency considers that the magnitude of Hellenic’s capital needs could potentially be met through private resources, it also adds the possibility that capital resources could be stressed given the expected very challenging environment.
That could ultimately necessitate a broader recapitalization, which is reflected in the Caa3 deposit rating.
Finally, Moody’s say that upwards rating pressure in the ratings is unlikely, while downward pressure on the banks’ ratings would develop following a failure to implement a bank recapitalisation programme or to maintain external liquidity support.
Other factors include, according to the agency, the higher asset-quality deterioration than currently expected, resulting in larger loss rates for bank depositors or creditors and/or Moody’s view that the risk of Cyprus exiting the euro area has increased.
Moreover, they downgraded senior unsecured debt ratings to C, from Caa3 while the agency confirmed Hellenic Bank’s deposit ratings at Caa3 with a negative outlook.
The subordinated and junior subordinated debt ratings of BoC have been affirmed at C. Hellenic does not have any rated debt outstanding.
Actions reflect, according to the rating agency, their expectation of material losses for BoC creditors in the coming months, and the risk of potential losses for Hellenic Bank in the coming years.
Explaining the rationale behind the downgrade of Bank of Cyprus’ deposit ratings to Ca from Caa3, Moody’s say it reflects their expectation of sizable losses to uninsured depositors in the coming months.
Based on Moody’s view that BoC’s capital deficit will widen following recent events and the subsequent deterioration in the operating environment, the rating agency expects that losses to BoC’s depositors to sufficiently recapitalise the bank will be sizable, but will likely not exceed 65%.
On the confirmation of Hellenic Bank’s deposit ratings, Moody’s say it reflects their view that the Caa3 rating level captures the risk and range of any potential losses to Hellenic’s depositors.
It is added that Hellenic’s stronger capital buffers have enabled it to maintain its private ownership, and avoid being subject to Cyprus’ recently adopted bank resolution framework.
Moody’s note however that the bank will require significant additional capital in the coming years, owing to the acceleration in asset-quality deterioration following recent events.
Although the rating agency considers that the magnitude of Hellenic’s capital needs could potentially be met through private resources, it also adds the possibility that capital resources could be stressed given the expected very challenging environment.
That could ultimately necessitate a broader recapitalization, which is reflected in the Caa3 deposit rating.
Finally, Moody’s say that upwards rating pressure in the ratings is unlikely, while downward pressure on the banks’ ratings would develop following a failure to implement a bank recapitalisation programme or to maintain external liquidity support.
Other factors include, according to the agency, the higher asset-quality deterioration than currently expected, resulting in larger loss rates for bank depositors or creditors and/or Moody’s view that the risk of Cyprus exiting the euro area has increased.
http://famagusta-gazette.com/cyprus-bank-governor-talks-of-death-threats-against-wife-and-children-p18954-69.htm
Cyprus bank governor talks of death threats against wife and children
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FAMAGUSTA GAZETTE
• Saturday, 13 April, 2013
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In an interview in Dublin with Bloomberg, Demetriades said his ability to manage the situation is being made more difficult by death threats not only to himself but toward his children and his wife.
He also said that the government has committed to a sale of state gold without consulting the central bank and added that their is constant interference in relation to the management of the banks under resolution.
Demetriades claimed that the government had not right to remove the deputy governor, Spyros Stavrinakis, from his post.
The post of the deputy governor of the Central Bank is reserved under the Constiturion for a Turkish Cypriot and his appointment by the previous government was made by invoking the law of necessity.
Two members of the central bank’s board, Andreas Matsis and Haralambos Akhniotis, resigned in recent days and a third board member, Louis Christofides, submitted his resignation on Thursday.
http://famagusta-gazette.com/spokesman-no-additional-needs-for-cyprus-beyond-those-agreed-with-troika-p18945-69.htm
Spokesman: No additional needs for Cyprus beyond those agreed with Troika
Government Spokesman Christos Stylianidis said Friday that although the European Commission has raised the financial needs of Cyprus from 17.5 to 23.5 billion euro, this does not indicate any new burdens on depositors, or recapitalization of banks.
Stylianidis added that the European Commission does not imply any additional needs for Cyprus beyond those which are already included in the Memorandum with the Troika (ECB, EC, IMF)
As he said, the European Commission’s estimations for 23.5 billion have already been considered and assessed in the final Memorandum and the loan agreement with the Troika.
Speaking to journalists at the Presidential Palace, Stylianidis said that indeed, the economic outlook has worsened since November 23, 2012, when the former government of Cyprus had concluded a draft agreement with the Troika.
As he said, the 23.5 billion euro were a result of the rapid deterioration in the banking sector and the fiscal needs of the state.
"This deterioration”, he pointed out, “was caused by the irresponsibility and indecisiveness to sign a Memorandum on time, between November and February”, he said, referring to former government of President Demetris Christofias which was then in office.
"Unfortunately, the passage of time has led us here. But there are certain people who are responsible for this lapse of time", he said.
Stylianidis added that the European Commission does not imply any additional needs for Cyprus beyond those which are already included in the Memorandum with the Troika (ECB, EC, IMF)
As he said, the European Commission’s estimations for 23.5 billion have already been considered and assessed in the final Memorandum and the loan agreement with the Troika.
Speaking to journalists at the Presidential Palace, Stylianidis said that indeed, the economic outlook has worsened since November 23, 2012, when the former government of Cyprus had concluded a draft agreement with the Troika.
As he said, the 23.5 billion euro were a result of the rapid deterioration in the banking sector and the fiscal needs of the state.
"This deterioration”, he pointed out, “was caused by the irresponsibility and indecisiveness to sign a Memorandum on time, between November and February”, he said, referring to former government of President Demetris Christofias which was then in office.
"Unfortunately, the passage of time has led us here. But there are certain people who are responsible for this lapse of time", he said.
http://famagusta-gazette.com/cyprus-finance-ministry-amends-sixth-decree-on-capital-controls-p18941-69.htm
Cyprus Finance Ministry amends sixth decree on capital controls
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As a result, individuals and legal entities are allowed to transfer €2.000 and €10.000, respectively, to other financial institutions, once a month.
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FAMAGUSTA GAZETTE
• Saturday, 13 April, 2013
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The Ministry said that legal entities and individuals are allowed only to make payments of up to €300,000 to other financial institutions, but transfers are not allowed.
As a result, individuals and legal entities are allowed to transfer €2.000 and €10.000, respectively, to other financial institutions, once a month.
Furthermore, the Ministry said that only existing customers of a credit institution are allowed to open a new account.
http://www.testosteronepit.com/home/2013/4/12/the-gloriously-ballooning-bailout-bedlam-of-cyprus.html
The Gloriously Ballooning Bailout Bedlam Of Cyprus
FRIDAY, APRIL 12, 2013 AT 8:29PM
Bailouts start out small. At first, Cyprus just had a funding crisis; the markets had gotten smart, after years of dousing the country with cheap euros. Not that the risks weren’t there before. But markets opened their eyes. So Cyprus went begging to Russia, and got €2.5 billion in November 2011. That money evaporated without a trace. Then last June, the two largest banks were deemed to need €2.3 billion – €500 million for the Bank of Cyprus and €1.8 billion for Laiki Bank – to fill a void in their regulatory capital, the story went. No big deal.
But the banks had been eviscerated by mismanagement and corruption, and their balance sheets were loaded with deteriorating Greek corporate debt; Greek government bonds that had received a 70% haircut; loans to developers extended during the real-estate bubble that had blown up; loans on developments that were never finished or were built so shoddily that they’ve been declared uninhabitable; loans to politicians that were written off as gifts; and mortgages extended to homeowners who were tangled up in a title-deed scandal that the banks themselves had aided and abetted, leaving 130,000 properties (in a country with 838,000 souls) without title deeds, with disputed ownership, and often worthless mortgages.
So by the end of June, as bailout talks with the Troika took off, “sources” mumbledsomething about €10 billion, including a government bailout, that hadn’t been on the table before. People gasped. But it was just the beginning. In August, Central Bank Governor Panicos Demetriades told parliament that the banks alone would need €12 billion! Plus a government bailout. Rumor consensus settled on €15 billion total. Then in September Russian Finance Minister Anton Siluanov upped the ante: Cyprus would indeed need €15 billion from the Troika, plus €5 billion from Russia, for a total of €20 billion.
Every time someone looked at the cesspool that these banks were, the bailout amount jumped. By March 25, the Troika’s number had risen to €17 billion. But it would be a new way of doing bank bailouts. The EU would contribute €9 billion, the IMF €1 billion, and €7 billion would be extracted from Cypriot uninsured depositors, bank bondholders, public sector workers, pensioners, corporate taxpayers, and others. Laiki Bank would be dismantled. The alternative would have been the collapse of the banks and the default of the government. It was an elegant, finely tuned instrument designed to keep the Eurozone intact – regardless of the price.
The havoc was immediate. So it was tweaked while banks were closed for over a week and draconian capital controls were imposed. The economy froze. But the deal stuck. Until late Wednesday.
That’s when the draft report, “Assessment of the actual or potential financing needs of Cyprus,” was leaked. Someone had given the banking cesspool, the governmental black hole, and the collapsing economy another look. “Debt sustainability analysis” it was called. And the bailout amount jumped to €23 billion – a dizzying 125% of GDP –ten times the bailout estimate of last June.
The additional €6 billion? The Cypriot government would have to extract them from people, businesses, and institutions. The Central Bank would have to sell €400 million worth of gold. Holders of Cypriot government bonds would get an appointment at the Eurozone barbershop for a crew cut. And so on. Bedlam broke out.
The Troika “served poison,” summarized President of Parliament Yannakis Omirou. “We will resist,” said Giorgos Doulouka, spokesman of the main opposition Akel party. “They are eating us alive,” he added. President Nikos Anastasiades asked for “extra assistance” from the Troika. He was immediately shot down by Luxembourg Finance Minister Luc Frieden – the “volume will remain at €10 billion” – and by German government spokesman Steffen Seibert – “The contribution from international creditors will not change.”
Two members of the governing council of the Central Bank – Haris Achniotis and Andreas Matsis – resigned and in their letter to President Anastasiades complained that the council served only for “decorative” purposes. A third member – Luis Christofides – resigned for the same reason.
The two sums weren’t “strictly comparable,” explained EU Economic and Monetary Affairs Commissioner Olli Rehn, trying to brush off the jump from €17 billion to €23 billion. “People have been comparing apples with pears and coming up with oranges.” One was “related to net financing needs” and the other was “a gross financing concept” that included buffers for a weaker fiscal development and more losses at the banks.
So at their meeting in Dublin Friday evening, the Eurozone finance ministers approved the €9 billion for Cyprus, noting “with satisfaction that the Cypriot authorities have implemented decisive bank resolution, restructuring, and recapitalization measures to address the fragile and unique situation of Cyprus’ financial sector....” Parliaments in Germany, Finland and other countries will rubber-stamp the deal. And by mid-May, the first few billions might start winding their way toward Cyprus.
But that too is just the beginning. The financial sector with its offshore services and foreign money, the core of the Cypriot economy, has been gutted. Whatever foreign money hadn’t left already would flee as soon as possible. People would no longer be able to get rich off corruption, money laundering, tax evasion, and other financial services, or off a real estate bubble.
But they did get rich off them: The average Cypriot household, according to a Eurozone-wide survey, the largest ever in Europe, had a phenomenal net worth of €670,900 ($872,000!). Over three times that of German or Dutch households, and just shy of Luxembourg’s €710,100. Wealth achievable only by small countries with huge, murky banking centers. Or oil. Few countries in the world are in that elite club. The results were so explosive that publication was delayed until after the Cyprus bailout had been decided. But the power structure had known the results for weeks [read... Total Fiasco: Germans are the Poorest, Cypriots the Second Richest in The Eurozone].
That wealth had been sucked out of the banks and the government until neither had a drop of lifeblood left. Now the party was over. And those households would be asked to foot a big part of the bailout costs. You can almost hear the snickering among European politicians.
But with financial services and real estate eliminated as a major economic activity, the country will have to refocus. Tourism is hard; it’s handicapped by the high euro and tough competition from Turkey. There is also offshore natural gas, but it will take years before the money starts flowing. The economy, deprived of its traditional activities, might perform a double-digit dive this year, and more bailout costs already appear on the horizon. What has the euro wrought?
Eurozone countries are falling like dominos. Taxpayer bailouts keep banks from collapsing, governments from defaulting, and investors from incurring well-deserved losses. In the US, President Obama’s budget, with its new taxes, is causing heart palpitations left and right. But how do countries really stack up? Read.... From Tax Hell to Tax Haven.
