A PROFESSIONAL services firm hired to investigate why the country’s two largest banks had to seek state support will also seek evidence of potential criminal offences, the Cyprus News Agency reported yesterday, citing Central Bank sources.
“If the firm, before it issues the final report, comes across some evidence, which signals civil or criminal liability” it will inform the Central Bank and give the information to the Attorney-general to examine the matter, CNA said, citing un-named sources inside the Central Bank.
The Central Bank said last week it had appointed Alvarez & Marsal to investigate what led the country’s two largest banks, Bank of Cyprus and Popular, to seek state support.
The probe was expected to “provide clarity and comprehension regarding the current financial stress” and guide remediation to strengthen the stability of the banking sector, the Central Bank said in a news release last Friday. Cypriot bank capital shortfalls from over exposure to Greek debt and then reliance on the government for aid forced Cyprus into seeking a financial bailout from its EU partners in June. A&M will investigate the conditions under which the bonds were acquired, the banks’ expansion abroad and the responsibility of the regulator.
The result of the investigation will help the Central Bank Governor make the necessary changes if it transpired that certain things must be put on a better basis, the source said.
Popular required state aid to fill a €1.8 billion shortfall in regulatory capital, and the Bank of Cyprus sought €500 million i.e. support when its own recapitalisation efforts fell through.
Both banks posted considerable losses on Greece’s debt restructure earlier this year, agreed by European Union leaders to make that country’s debt more sustainable.