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TMCNet:  CBC Governor Panicos Demetriades resigns (Updated) [Cyprus Mail]

[March 10, 2014]

CBC Governor Panicos Demetriades resigns (Updated) [Cyprus Mail]

(Cyprus Mail Via Acquire Media NewsEdge) By George Psyllides CENTRAL BANK Governor Panicos Demetriades resigned on Monday after two turbulent years in office, which also saw the launch of an investigation into his dealings with a consultancy firm.


An official statement said Demetriades' resignation has been accepted by President Nicos Anastasiades.

Demetriades handed over his resignation in Brussels on Monday, to Finance Minister Harris Georgiades, in the presence of a European Central Bank (ECB) representative.

Both Cypriot officials were in Brussels for a Eurogroup meeting.

The reason for his resignation was not immediately clear, but he has had testy relations with the current administration and Anastasiades had said late last year that he was seeking his removal.

Reuters reported that one source who saw the resignation letter said Demetriades cited “family and personal” reasons for his departure, and “difficulty in cooperating with the Board of Directors” at the Central Bank.

Demetriades has been in his post for almost two years, after being appointed by the previous administration.

Tension between the two men simmered for months, as Anastasiades sharply criticised the governor's handling of the island's international bailout last March.

The ECB had issued warnings to the Cypriot authorities not to interfere in Demetriades' work, but locally the Central Bank chief was the subject of much criticism for being slow in restructuring the banking sector.

He has maintained that when he took over in May 2012, less than a year before the bailout, he assumed a poorly regulated banking system which had been taking excessive risks.

One of the main criticisms directed against Demetriades has been how, under his watch, the now defunct Laiki Bank accumulated around €9.5 billion in emergency liquidity aid, only to buckle and fail when the ECB threatened to pull assistance.

"How much independence can a central banker have when, from his statements, it appears he was serving other expediencies instead of his country's interest," Anastasiades said last year.

For the state to get its €10 billion in bailout funds last March, the president said, it was told to privatise state companies, seize deposits, make painful cuts, and raise taxes.

"Can you tell me how someone persuaded the ECB so that an insolvent bank was given €9.5 billion [in ELA] without all these commitments?" Anastasiades said, suggesting that Demetriades was responsible.

The president also said how Demetriades in the past had said that Laiki had been kept on a ventilator until February's (2013) presidential elections.

Demetriades has also been the focus of a police investigation into an agreement he had struck with consultants Alvarez & Marsal.

The investigation was launched in late October following media reports that Demetriades had agreed to pay A&M a 0.10 per cent fee on any amount needed to recapitalise the banks, including when cash was seized from depositors.

The deal was allegedly signed after the Eurogroup decided to seize depositors' cash to recapitalise banks.

An internal CBC audit, leaked to the media late last year, concluded among others, that Demetriades had withheld information and agreements signed with A&M, misled the CBC board, committed millions that were not budgeted, and without the approval of the board signed an agreement to pay the consultancy a "success fee" after the fact, and awarded jobs to one company without a tender procedure.

On Monday afternoon, Attorney-general Costas Clerides was quoted by Sigmalive as saying said that after considering the facts of the case he was not going to prosecute Demetriades as he denied that a deal had been struck.

According to Demetriades' contract, a month's notice is required, and for that reason his resignation will be effective as of April 10.

During this period, he will deal with the pending issues before him and will brief his successor.

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