DEMETRIS Christofias might no longer be president, but the man he appointed as Governor of the Central Bank, Panicos Demetriades appears intent on continuing his work – the destruction of the Cyprus banking sector. There is no other way to explain the leaking of the 11-page memo that Demetriades presented to President Anastasiades about the state of the banking sector.
The main points of the memo, which painted a very bleak picture of the banks’ prospects and stoutly defended the methodology used by Pimco in deciding the level of capital assistance they needed, were published in Wednesday’s Phileleftheros. Given that the Central Bank has leaked information to the paper on several occasions in the past, it is reasonable to deduce it was the source this time as well.
After all, at a time when the government has urged the Governor to try to lower the banks’ re-capitalisation needs, it would be resoundingly stupid for it to release information to the press, about the allegedly, rapid rate of growth of non-performing loans as a result of the recession in Cyprus and Greece. Nor would the government have anything to gain from publicising a document which indirectly defended Pimco’s methodology and justified the use of the adverse macroeconomic scenario for calculating the banks’ capital needs.
In his memo Demetriades warns that the investigation of anti money-laundering measures by private firms could lead to withdrawal of deposits by foreigners, increasing the liquidity problems of the banks as well as their capital requirements, which in turn would increase the amount of financial assistance required. While this is a legitimate concern that he should have conveyed to government, did it serve the country’s interest to make it public?
Certainly not. The leaking of the memo served only Demetriades’ personal agenda – to show he was against a private firm investigating allegations of money-laundering (as if the government had a choice in the matter) and that Pimco’s re-capitalisation figure was correct given the rapid growth of non-performing loans (therefore he was not to blame for agreeing to the company’s methodology and assumptions). Does Demetriades not realise he is not only undermining the government’s efforts to lower the capital requirements of the banks but also further destabilising the sector by releasing this type of information?
It was ironic that, in his memo, the Governor expressed concern about the money-laundering audit leading to withdrawals of bank deposits and threatening the stability of the banking sector. But the fact is that nobody has threatened the stability of the banking sector in the last 10 months more than Demetriades. And the leak of the memo he gave to the president shows he is intent on carrying on doing this. What else does he have to do to show he is unfit to be the Governor of the Central Bank?
