LAWMAKERS were coerced into backing a rescue package for ailing Laiki Bank last May, European Party MP Demetris Syllouris said yesterday.
“Parliament was forced to vote for the €1.8bn,” Syllouris told a panel that is looking into the circumstances leading to the economy’s near-collapse.
In May 2012 parliament overwhelmingly voted in favour of the state underwriting the issue of €1.8bn in new shares for Laiki to help it recapitalise from its exposure to toxic Greek debt.
A government bill had been rushed through the House plenum, leaving legislators little time to study it, Syllouris said.
MPs were then told to pass the bill “as is” on the same day - before the bank re-opened for business - or else Laiki would go under, taking the rest of the economy with it.
He and his colleagues were forced to go along, even though they lacked the information to make an informed decision, said Syllouris.
One crucial bit of information that was missing was the bank prospectus for the share issue. At the plenary session, Syllouris said, he proposed that parliament postpone the vote until the prospectus came out the following Monday.
“At the time I was personally in favour of the bank closing,” he said.
When in May 2012 the state underwrote €1.8bn to float stricken Laiki, the lender was already neck-deep in emergency liquidity assistance (ELA) to the tune of €3.8bn due to a steady outflow of deposits since the summer of 2011.
In July of 2012 Cyprus’ sovereign debt was rated junk, meaning it could not be held as collateral for underwriting the bank, and it’s understood that at that point Laiki was technically insolvent.
The House Watchdog Committee, which Syllouris chairs, is itself investigating cash withdrawals from banks in Cyprus ahead of the March 16 decision on a ‘haircut’ of deposits - the suspicion being that these depositors had inside information.
The committee had asked the Central Bank to furnish data going back an entire year prior to the haircut decision, however the regulator provided information only on the period from 1 to 15 March.
Syllouris informed the panel yesterday of various information obtained by the House committee, such as the case of a senior bank executive who took €2.2m out of Cyprus on March 16. The allegations against the bank exec came from an employee of the same bank, Syllouris said.
The MP further claimed that a number of bank whistleblowers had received either death threats or threats of legal action.
Commenting on the broader malaise in the Cypriot economy, with regard to the public sector in particular, Syllouris noted that “we wouldn’t be in this mess today had we promoted ability rather than cronyism.”
Asked to elaborate, the MP retorted: “Name one board of semi-governmental organisation, cooperative or government department without a son-in-law, daughter-in-law or father-in-law.”
European Party MP Demetris Syllouris testified at the inquiry into the economy yesterday