A NUMBER of bank employees are said to have received death threats from angry investors who feel they were tricked into buying bank securities or converting their securities into what turned out to be dud shares.
This came to light yesterday following a meeting between a group of investors and the leadership of the Cyprus Securities and Exchange Commission (CySEC).
Accompanied by politicians, the investors queried the regulatory authority on whether it was possible to convert bank shares back into securities.
Kyriacos Aristeidou, a spokesman for the group, said that back in June a number of them were "pressed" by banks to convert their securities into shares. The bank shares in question were subsequently not listed on the stock exchange.
He said these investors number a little over 100, and their securities were worth between €3 million and €4 million - a small amount that would not affect the recapitalisation of the banks should the shares be re-converted into securities.
CySEC chairwoman Demetra Kalogirou promised the investors she would take it up with the Central Bank and the Popular Bank and that she would ask for a freeze on listing shares on the bourse "until the matter is cleared up."
She said that under the regulations, conversion of ordinary shares should be listed on the Cyprus Stock Exchange "as they are of the same category as already listed shares with a possibility of listing them for a period up to 12 months."
Eleni Chrysostomou, spokesperson for the Greens, told newsmen later that neither the Central Bank nor the Finance Ministry were without blame as both had been aware of banks' practices but nevertheless failed to warn unsuspecting investors.
A variety of disgruntled investors groups have emerged after the island's two largest lenders - in need of a bailout - collectively accumulated €1.4 billion in securities but stopped paying interest on them after making significant losses in the wake of a Greek sovereign debt write-down.
The banks closed access to capital, affecting some 8,000 people.
The majority of the investors claim they were deceived by the banks into investing in securities without being told the risks by an authorised professional.
The government, unable to support the banks because of its growing budget deficit, itself requested an EU bailout on June 25.
The troika - a team of technocrats from the IMF, the European Central Bank and the European Commission – has reportedly recommended that either the banks buy the securities back at a discount or else the securities be converted to shares.
If the banks buy back the securities, investors would be accepting a write-down. Should investors get shares instead, then they will be offered shares at a nominal value of €1.0 although currently they are selling at a fraction of that.
The bulk of the investors have banded into the Bank Security Holders Association, which on Friday convened its first formal meeting.
In a written statement, the association reiterated its proposal for the banks to convert their securities into bonds with a 5.0 per cent interest rate, an expiry date of five years, and the option to retrieve 20 per cent of the capital each year.
The association sought to put paid to rumours circulating that Cypriot taxpayers would supposedly end up footing the bill for the "securities scandal."
"What our proposal entails is that the banks give loans to the holders of the securities, using the securities as collateral, and that these securities would continue to count as Tier 1 capital. In this way, the banks' capital adequacy would not be affected," the statement said.