CBC boss sees no reason to quit.
Author:George Psyllides
CENTRAL Bank of Cyprus (CBC) Governor Panicos Demetriades said yesterday he had no intention of resigning, as a rift with the government appeared to persist over the way he was handling the island's banking crisis.
"There is no such issue," Demetriades told a news conference. "I said it in the past and I would like to close this matter. As the CBC we did everything possible ... to avoid much worse, catastrophic scenarios, which we actually had before us."
In exchange for a e1/410 billion bailout from the eurozone and International Monetary Fund, Cyprus had been forced to close Laiki, its second biggest bank, and restructure its biggest, Bank of Cyprus (BoC), including imposing losses on deposits over e1/4100,000.
Commenting on the CBC's reportedly strained relationship with the new government, Demetriades said:"There is no problem as far as we are concerned. We would like to see respect of the independence of the Central Bank, which is very important and stems from Cyprus` obligations to the EU."
Despite the CBC boss' protestations that everything was fine The government however appeared to be unhappy yesterday over the delay in the BoC restructuring process.
"I would not say I am satisfied with the progress at the BoC," Finance Minister Harris Georgiades told state radio earlier yesterday.
The government did not want the process to drag on until September, as the CBC suggested at some point, the minister said, adding that Demetriades had pledged to wrap up procedures last week, on May 2.
"We think we are already late," Georgiades said, though acknowledging there were practical and legal issues in the way.
The minister said cooperation with the CBC boss "could have been much better."
Demetriades and Georgiades met President Nicos Anastasiades yesterday at the presidential palace for two hours but no statements were made afterwards.
The CBC chief said there was no problem from the regulator's side.
"Of course we will cooperate but always within the framework of respecting the institutions."
On the delays concerning the BoC, Demetriades said the administrator would go when suitable person was found -- "I hope within the next days" -- to take over as CEO.
Restructuring the lender would take more time however, because it depended on a string of lawsuits filed by depositors against the decision to seize their cash.
The government is also keen to see more capital controls lifted as they were not conducive to the recovery of the economy.
The restrictions were deemed necessary to prevent a run on banks after the raid on deposits.
Controls have since been relaxed but more was needed for the situation to return to normalcy.
Demetriades said the CBC shared the government's views on lifting the restrictions as soon as possible, but the possible effects on bank liquidity were a concern.
"However, we must always take into account the liquidity and the effects these measures would have on deposit outflows," he said. "Certainly, the restrictions have not helped the recovery of the economy, but they are necessary until the depositors' trust is restored."
Demetriades said most of the depositors who lost money at BoC were from overseas and that Cypriots had not been hit as hard as might have been expected.
"Seventy per cent of the value of deposits concerned overseas residents, leaving Cypriot households and businesses unaffected to a greater extent than was possibly expected," he said.
Demetriades said overall 96 per cent of deposits in Cyprus were unaffected by losses on larger accounts required by the eurozone in exchange for aid.
"Certainly what happened was very painful for many depositors, particularly those who did not have loans (which were netted against deposits). But 96 per cent of deposits were not affected," Demetriades said.
The CBC chief sought to strike a positive note, stressing that despite the hardship, the bailout agreement had averted catastrophic scenarios like the collapse of systemic banks or the disorderly bankruptcy of the state.
"We avoided the liquidation of the affected banks, an action that would not only have affected all depositors but also borrowers, who would be forced to pay off all their loans," Demetriades said.
The governor warned however that short-term prospects remained gloomy.
Central Bank Governor Panicos Demetriades at his news conference yesterday (Christos Theodorides)
Copyright Cyprus Mail 2013
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| Publication: | Cyprus Mail (Cyprus) |
|---|---|
| Geographic Code: | 4EXCY |
| Date: | May 10, 2013 |
| Words: | 722 |
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