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BANKING: Cyprus court rejects injunction on FBME sale

07 August, 2014

A court in Cyprus has rejected the injunction order sought by Tanzania-based FBME Bank to prevent the sale of its local branch operations by the resolution authority, that was appointed in order to protect the interest of depositors and customers.


The Central Bank of Cyprus said on Friday that the bank’s administration was decided after the failure of correspondent banks to conduct transaction following a US Treasury Dept. listing of the bank branch as a potential money launderer, and not directly at the request of the Treasury’s FinCEN service.
According to a decree issued on July 21, the resolution authority appointed Dinos Christofides as Special Administrator to undertake the day-to-day running of the bank and also the sale of FBME Bank’s Cyprus branch, but no other subsidiaries, such as the IMSP credit card clearing house that had a 4% market share, but suspended operations on Thursday.
IMSP had announced two weeks earlier that due to controls imposed by the Central Bank on its primary bank, FBME Bank, and the freezing of transactions by all overseas correspondent banks, it could not provide clearing services or collection on the part of its merchants, hampering the already troubled retail sector.
However, it said it will continue to settle all due to merchants and other providers.
JCC Payment Systems, 75%-owned by the Bank of Cyprus together with Hellenic Bank and the local subsidiaries of three Greek banks, commands the remaining 96% of the market and is now expected to become a monopoly once again, with the blessing of the Central Bank.
FBME Bank customers are frustrated by the whole situation, with the Financial Mirror receiving several complaints that they had no access or limited access to their accounts and that some could not pay rents, utilities, or other bills.
In a desperate plea to Administrator Christofides, the chief executive of Alter Ego Group, a Limassol-based wealth management company, Mike Gray, said that he has not had a satisfactory answer as regards transactions that were accepted, pending or outstanding.
“On each occasion that I have contacted the bank I have been told that no transactions are taking place! However, according to the Cyprus Mail ‘Since July 29 payments have resumed, but the administrator’s approval is required for each transaction.’ Therefore, I should be grateful for a indication of when my transaction will be finally processed, I can top my VISA card up and I can pay CYTA and EAC, which will allow my firm to conclude certain projects and invoice clients. Otherwise we are out of business,” said Gary.
The Financial Mirror learned last week that IMSP, the trade name for FBME Card Services, had been using own funds to pay merchants, ever since FBME’s main correspondent Deutsche Bank had frozen all transactions.
IMSP clients, many of whom used its own POS terminals, but also that of JCC, were been unable to accept card payments by VISA or MasterCard.
Trying to find out when FBME’s banking operations can resume, much to the annoyance of thousands of customers who are, once again, giving Cyprus a bad name as a jurisdiction of incompetents, has proven an uphill battle.
A Central Bank spokesperson suggested we speak to the administrator directly and Dinos Christofides said he was not willing to make any statement to the press. An FBME spokesperson said the bank cannot make any statement as it is under administration. An FBME Card Services official was not available for any comment, despite being free of administration, but still remains subject to Central Bank supervision.