10 February 2015
Rumour has it that the Central Bank of Cyprus intends to misappropriate FBME Bank funds for premiums related to deposit protection insurance, effectively making the Bank pay twice. This cannot be the intention of the Central Bank, as it knows full well that there is no legal basis for taking such action. But it ought to look at the verbal statements being made by its appointed Administrator, Mr. Dinos Christofides.
As is well known, Mr. Christofides is not a banker, far from it, but someone should advise him on banking law. FBME Bank’s Cyprus branch has been paying its deposit protection insurance premium to the Central Bank of Cyprus since 2004, in Cyprus Pounds to the end of 2007 and thereafter in Euros. This is a matter of ascertainable fact.
Now Mr. Christofides is making the ludicrous statement that the Central Bank of Cyprus’s holding of between EUR 140 million and EUR 150 million of FBME funds is going to be used to pay depositors under the insurance scheme. Isn’t that the Central Bank of Cyprus’s responsibility and doesn’t it already have FBME’s premium payments to enable it to do so?
On both counts, the answer is yes. The Administrator cannot make up rules as he goes along and cannot use FBME Bank funds to pay for something that is the responsibility of the Central Bank and its deposit protection scheme.
- FBME Bank funds held by the Central Bank of Cyprus are in excess of EUR 140 million.
- Its other funds in various holdings are in excess of EUR 1.7 billion, making the bank 90% liquid. Put another way, it is one of the most solvent of banks and well above all international benchmarks.
- Therefore, there is no basis for the Administrator declaring he has concerns over the liquidity of the Cyprus branch of FBME Bank.
- The Central Bank of Cyprus ought to consult the relevant Basel Guidelines on the subject and other matters to do with the taking of resolution measures, and perhaps have them sent over to the Administrator too. We could help as we have a set we use for referral.
Placements to Deposits 89.13%
Placements and Bonds to Total Deposits 103.29%
Gross Loans to Deposits 16.58%
Net Loans to Deposits 10.28%