Cyprus & World News

CYPRUS: Parliamentary brouhaha over bank loans

28 November, 2012

 * Orphanides counters communist “mud slinging” *

With the presidential election campaigning in full swing, political parties and their parliamentary deputies have finally found the time to deal with loans given to banking and public officials at privileged rates.
During a heated session of the House Ways and Means Committee on Tuesday, MPs demanded that all the loans afforded to banking executives, board members, politicians and public figures, that enjoyed privileged or zero rates, or the ones that were written off to be published. But they were quickly shot down by Attorney General Petros Clerides who said that it would be impossible for the authorities and the commercial and Coop banks to disclose such information.
“Do you expect the Central Bank and the Ministry of Finance to give out a list of all those who got a low interest loan from the Central Bank, Bank of Cyprus, Laiki, Hellenic Bank and the Coops of their villages? It is impossible to find out if the Agros village Cooperative gave a preferential-interest loan to the fourth niece of my mother-in-law. But you should also consider that financial institutions may give lower-interest loans to whoever they deem as credible,” Clerides said.
Committee chairman Demetris Syllouris, leader of the centre-right European Party (Evroko) suggested that it would be better if all questions and allegations were put in writing and forwarded to the relevant authorities for comment.
“The investigation should be extended to all banks. I will propose at the next parliamentary leaders’ meeting that we hire experts to help with the investigation,” Syllouris said.
On the other hand, opposition DISY deputy Kyriakos Hadjiyiannis cast doubt overt the credibility of the banking sector reviews being conducted by Pimco and Alvares and Marsal.
“One of the investigators had been and is presently within the circle of a person directly linked to the collapse of our banking system,” Hadjiyiannis said, adding that the non-performing loans at the Cooperatives should also be investigated fully, as well as their investments in Cyprus government bonds.
This fuelled the anger of the communist AKEL deputies, with Eirini Charalambidou suggesting that former centralbanker Athanassios Orphanides, well known for his opposition to the current government’s handling of public finances and the writedown of sovereign debt, had secured a loan worth “hundreds of thousands” of euros with zero interest from the Central Bank.
It is believed that Orphanides, who has been publicly attacked by President Christofias and the ruling AKEL party for his criticism of the administration’s handling of the economy, may have had a clause in his employment contract allowing a low-interest loan, as required by the late former President Tassos Papadopoulos.

“I am saddened to see that the (Akel-led administration’s) efforts to undermine the banking sector continue,” Orphanides responded in a statement on Wednesday, adding that “recent allegations suggest that I abused my position as Governor for improper loans and concentrated executive powers away from the Central Bank Council.”
“The mudslinging by Akel deputies, taking advantage of their parliamentary immunity and my absence abroad, does not surprise me. It is, after all, a well-known tactic based on a saying by Lenin that a lie can eventually become the truth if it is repeated a lot of times.”
Orphanides refuted allegations of abuse of Central Bank funds and called on the House of Representatives to conduct an inquiry at the central bank to investigate any irregularities.
“During my term, the only loan I got from the Central Bank was in accordance with my employment contract and the terms were also stated in my contract. Shadows that hurt the credibility of the Republic should be investigated in order to achieve full transparency.
As regards allegations of abuse of executive power, the former centralbanker said that the point of conflict lies elsewhere.
“I refused to agree to a request that would serve other interests being promoted by the ruling Akel party. In 2009, despite the intensive efforts of the Akel circle, including the then-Finance Minister Charilaos Stavrakis and CB Council member Pambos Papageorghiou and even President Demetris Christofias, I refused to allow a relaxation of banking supervision and exemptions that would serve the interests of a certain businessman who at the time controlled a large bank. After my refusal, three members of the Central Bank Council (Marios Klitou, Nicos Constantinou and Pambos Papageorghiou) tried to change the institutional framework that would give them decision-making powers. Needless to say that no reason has as yet been given for the Akel government’s support of the said businessman.”
In conclusion, Orphanides said that the continued damage caused to the banking sector’s credibility must stop.
“During the past few months, the harm in inflicted to the economy, as result of this, has been huge. The administration by the Akel government has pushed unemployment to record levels, it has put a halt to development and has brought the country to the brink of a bailout, which until recently could have been avoided. As a result, our nation’s sovereignty is at risk.”