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Banking system corruption

Investigators looking into corruption in the Cyprus banking system that resulted in the collapse of the island’s economy have uncovered unprecedented bad lending practices by the banks.

CDorruption in the banking systemINVESTIGATORS probing reasons that resulted in the meltdown of the Cyprus economy in 2013 have uncovered unprecedented bad practices by banks, which lead to the squandering of billions of Euros.

Sources close to the team of investigators told state broadcaster CyBC that large loans were approved by the banks without due appraisal of collateral values.

In some cases the banks did not ask borrowers to provide proof of their economic situation, while in other cases uncovered by the investigators banks accepted forged guarantee documents.

Many large loans were given at an ‘unusually low interest rate’ and in one of the cases uncovered so far, the bank granted the borrower a 3-year grace period.

Investigators have requested the British, Greek and Italian authorities to provide information on loan guarantees.

The sources revealed that some of the investigations are close to the stage where charges can be filed against people involved in the banking malpractices.

Readers' comments

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  • jjames says:

    On Friday 19th April 2013, I deduce from the article above entitled “Cyprus banking idiosyncrasies laid bare”, that the PIMCO report highlighted some serious flaws in the Cyprus banking system!

    Thank you Nigel for pointing us to this! Might it not then be reasonable to ask: is the existence of this report known to the latest team of investigators? are they taking its findings as a starting point to their own enquiries? why was the PIMCO enquiry, or a new team of investigators, not engaged immediately to follow up with more detailed examinations?
    (I’m fully aware that this point I make will be why you have provided the link.)

    Are the Troika, EC as part of their infringement proceedings and the British Government making the same link and taking note of such protracted actions? If not why not? If yes will they ask the same simple questions?

    If they do it will they tolerate the several months it will take to get an answer? Of course they will.

    It’s yet another delaying tactic to keep us entertained while business carries on as usual!

  • Stuart says:

    @Nigel on 5 May 2015 at 8:59 pm

    In the UK it has been the bank itself that has been fined by the Financial Conduct Authority (previously known as the Financial Services Authority) for malpractice but very few individuals have been prosecuted unless there was conclusive evidence of their personal criminal involvement in the particular offence.

    It might prove difficult to prosecute individual bank staff in Cyprus where their respective banks operated a liberal regime of irresponsible lending. Furthermore, fining Cyprus banks millions of Euros for delinquent or corrupt practice could prove counter-productive in such a fragile state of the Cyprus economy.

  • @Augean Stables on 2015/05/05 at 9:21 pm – As soon as I have any news to report, you’ll read about it here.

  • Augean Stables says:

    Nigel, any news of the Swiss Franc cases that were coming to Trial in April/ May ?

  • @Stuart on 2015/05/05 at 8:07 pm – I believe that the state legal services are carrying out the investigations. You’ll find many more reports on the Cyprus Mail website. As for sanctions on those found guilty – that’s up to the judge to decide when the cases come to court.

  • Stuart says:

    @Nigel.

    Can you please tell us which statutory body has authorised these investigations and what sanctions are available to it in the event of proven corruption?

    Everyone knows what has been going on in Cyprus with corruption and malpractice in its banking system but how are charges to be brought against individuals and in which courts will cases be heard?

    There clearly has to be a legal framework for any charges to be actionable but who is responsible for initiating the process?

  • Richard says:

    Well – let’s hope that finally some punishments are dished out – rather than the US style “well here’s a tap on the wrist – and a caution” we saw 2009-2010 after the global fiscal crash investigation.

    I’m not holding my breath – but if in just one corner of the world – they finally hold the banks responsible for their reckless actions – it’s a start.

  • Deanna says:

    Can’t wait for the doodoo to hit the fans!

  • Andrew says:

    Banks knew full well that “developers” would build and then sell on homes. Yet these same banks did nothing to ensure their loans were being repaid,as and when each home was sold. The banks thought they could use unwitting buyers to pay AGAIN for their homes.

    This was facilitated by lawyers who failed in their legal or moral duty to inform their clients of these HIDDEN mortgages

    Go to your developers bank and ask them how much your developer owes and they will tell you that it is a confidential matter between them and the developer. Why then do they hold you, the innocent home buyer, to ransom?

  • John Pyrokkas says:

    It is ironic and a kick in the teeth for myself, to hear all these scams.

    After a hard sell procedure by the Laiki bank manager at Niki’s branch Nicosia and after having been promised that if I placed my funds in the Axiografa [bonds] for 5 years which was presented as an alternative deposit scheme, that I could borrow from my funds as much as 100%, they refused the 100% loan.

    They refused to lend me my own money! For 3 years I was actively seeking the loan up to the 15th March 2013 2 days before the Bail in theft they carried out.

    What am I to think, what am I to do when I hear what they had been up to?

    Having come from the UK after living there for 30 years, believing that Cyprus as part of the EC would now be affording the protection I had in the UK, I can tell you that it isn’t so. Far from it.

    I would advise any British people seeking to come to Cyprus, to be very careful indeed.

    Do not fall for the smiles and nice talk and coffee even lunch and dinner offerings of Cypriot Bank Managers, property dealers, lawyers or anyone offering to help you find your way in Cyprus.

    Always be suspicious and cautious my friends.

    Fall for it and you almost certainly find yourselves in the same dire straits as I have myself. Without legal protection. Without rights, even human rights.

    I wish I had stayed in the UK with the bad weather, high taxes, too much traffic, and the rest of it.

    If you are planning to come, do not bring your money with you.

    If you want to buy property, see the title deeds, get a copy and carry out a search in the Land Registry to see if it has a Memo registered on it or if it is mortgaged or similarly for the Land [plot] because mostly the title deeds will be only for the land , NOT the buildings.

    Always remember! The Butcher does not give you meat because you are hungry, similarly the Grocer does not give you rice and pasta because you are hungry or because he likes you. They give them to you because they always think of their profit first and foremost and only because of that, no matter what they make you believe.

    Anyone needing advice from a true friend who has experienced all there is to know about Cyprus and all things Cypriot, feel free to contact me at I don’t charge for my advice albeit anyone wishing and able to assist a victim of Cypriot fraud and corruption is most welcome to do so at their own initiative.

    Respectfully

    John Pyrokkas

  • Steve R says:

    Another story that will get hushed up and fizzle out because of the now famous ability to delay matters on this island. Just look at the Aristo case. He was found not guilty for the charge of laundering money even though the prosecutors uncovered millions of euro that had been paid to him in cash. I hope that things do get uncovered by these investigators but how many years will it take to bring these people to justice. Lets not forget that many of the people who bought property in Cyprus were getting on in years and will probably pass away before these matters are sorted out. Will the next generation of the people who were scammed continue the fight or would it take too much effort, time and money to justify the end result.

  • Campbell Findlay says:

    Lets see how they try and blag their way out of this one.

  • K P says:

    For us simple people its easy to separate black from white. What happened during the property boom of 2004-2009 was part of a master plan to inject excess money in the economy and receive back with high dividends. Small companies, uneducated “business men”, people with family links to political or influential personalities in the tiny island of Cyprus got access to huge amounts of cash with out collateral or guarantees or even a business plan with accounts backing them up. The developers were getting loans and selling projects without building permits and even in cases without a project master plan! We hear many foreigners who bought properties and were delivered something completely different from their orders.

    Nowadays we hear a lot of legal and financial jargon from the bureaucrats trying to cover up the interests of the “blessed ones” in Cyprus. But the simple truth is that many simple people are left to live life on mere basics, some have lost their savings, some have lost their jobs and the scarceness of money in the market has pushed salaries and working conditions/ terms to levels no Cypriot would have imagined 10 years ago!!

  • MartynG says:

    Some of us have been saying it for many years: poor > non-existing ‘banking practices, large scale corruption, dodgy solicitors and ‘legal practices’, ‘mates loans and rates’, unchecked guarantees, unpaid developer loans blocking Good Title to 10s of thousands of property purchasers, we could go on and on but clearly at long last the tide is turning, there is a new spirit, evidenced below, that – finally! – the systemic weak/bad practices are being uncovered and will, we all hope, be fully and properly addressed.

    What this will mean for the so-far cosy and virtually ‘untouchable’ Cyprus banks, who knows? – probably when the full extents are exposed, another Cyprus banking crisis, possibly alongside similar in Greece the way things are going there. The wise ones took their main deposits well away from the Cyprus banks before the ’13 debacle – so who is going to ‘pick up the tabs’ this next time around?

    Lots of Questions, so far very few answers but: could soon be another major side-swipe to the already rocky Cyprus economy. One just wonders what the Stress-Testers from the Troika were doing those years ago before the brown stuff really started hitting the fans?

  • Sue says:

    Not at all surprised, they joined the EU, but went on their own way as usual.

  • mh says:

    The Cypriot banking system continues to circle the plug hole. The Banks continue to pick on the weak. For those who have been offered “settlements”, don’t be swayed. They are desperate to keep out of the courts, at all costs. Their time will come then it will be like a house made of playing cards. Be strong, stay to the end, our time is coming.

  • Dannyboy says:

    Dear Lawyers Bankers Developers in Paphos.

    If you are reading this article tonight we will have our day in court it is coming and it will be the High Court in UK not Cyprus, & all this sordid corrupt story will unfold and be told at last!.

    I hope this article tonight will give hope to all those UK buyers caught up in this scam. Do not give up and settle with these crooks, fight on and get justice as our day is coming.

    All they have done all along is threaten with Writs and EEOs against UK buyers, but the truth will at last be heard. So everyone don’t give up keep on fighting, as Cyprus Banking system is not a law unto itself it not untouchable and so the truth will come out at last. Enjoy reading this Bankers.

  • Lyn says:

    This comes as no surprise as thousands of Brits have been put into housing loans with terms that they never agreed to using false Power of Attorney documents.

    The banking code of practise was never adhered to and the interest rate margins have been ridiculously high and only one currency was offered in most cases which was Swiss Franc.

    There would appear to be around 1.6M EURO that has been released to one Cypriot developer under these practises and they need investigating ASAP as peoples homes in the UK are under threat.

    Wrong on every level!

    Time to start holding these bankers and developers responsible for their actions and putting a beautiful country into turmoil with their fraudulent and abhorrent behaviour!

    Anyone wants more info please just ask.

  • Pete says:

    It’s way past time the banking practices here were brought out into the open; far too many backhanders have changed hands, loans given using other people’s properties as collateral and guarantors have been ignored because ‘they’re locals’ and foreign buyers have been targeted to repay developer debts. And let’s stop using the term Non Performing Loan; they are UNPAID DEBTS that run into millions if not billions, and will we ever find out how many of these were taken out in the full knowledge they would never be repaid? On this tiny island the existence of so many unpaid loans demonstrates complete and utter incompetence or collusion; probably both but the fact remains that bank staff have benefited from granting loans to many strategic defaulters and this whole saga needs to go before people with the skill and willingness to bring the guilty parties to justice. But I’m not holding my breath.

  • Josh says:

    I suppose if you are the Chairperson of a bank and you require a loan for your other interests, then you will do the obvious and see to it that you get very preferential terms.

    Common sense if given the chance but where in the world could that happen? I wonder

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