The Central Bank of Cyprus has rejected allegations by the shareholders of Tanzania-based FBME Bank that it is responsible for the demise of the bank’s Cyprus branch, which has been suspended for nearly two months causing havoc to customers who have little or no access to their funds.
They have suggested that the action was a “hostile takeover” in order to sell the cash-rich operations to third parties.
“Shareholders of FBME Limited are holding the Central Bank of Cyprus and individuals personally liable for damage and loss suffered by FBME Bank, its depositors and owners. Those persons considered responsible include but are not limited to the special administrator appointed by the Central Bank to control the operations of the Cyprus branch of FBME Bank,” the bank said in an announcement earlier Thursday.
The Central Bank responded saying that as a resolution authority it will not discuss the legal aspects of the case, which is being debated in the courts, but that all accusations are “baseless” and “unworthy of any comment.”
It added that “from the first moment that the problem arose, the aim has been the stabilisation of the FBME Cyprus branch operations and the protection of depositors. Unfortunately, the who effort is being obstructed not only because of the refusal of the correspondent banks to cooperate with the bank (as a result of its characterisation by the U.S. authorities as “primary concern of money laundering”), but also by the actions of the bank’s shareholders themselves.”
The Central Bank added that the trading activities of the branch customers, where this was permitted despite the absence of correspondent banks, has been impeded further because the branch cannot access the European SEPA system, the administrator appointed in Tanzania for the head offices has terminated the SWIFT payments system and FBME itself and its shareholders, by way of their lawyers have prevented the access to customers of funds in other banks.
“Despite the serious difficulties, the Special Administrator appointed by the resolution authority is undertaking every possible effort to gradually start the trading activity of the branch’s customers,” the Central bank said, concluding that it was forthcoming to a request for a meeting with the shareholders, but the latter cancelled the meeting.
The shareholders of FBME Limited claimed that “the stated intention of the Central Bank has been to expropriate the Cyprus branch and to sell it to outside interests against the wishes of its owners. Resolution powers have been imposed against the Cyprus branch of the Bank, whereas those powers were designed only for institutions facing insolvency, not healthy banks such as FBME.”
The shareholders said they are seeking a legal solution to the actions of the Central Bank of Cyprus and its administrator in line with protection afforded under Cypriot, EU and international law.
They added that the “bank’s Cyprus branch has been prevented by the Central Bank of Cyprus’s administrator from keeping its depositors, correspondents and others from being informed as to what is happening at the branch. As a result the holding company has responded by posting regular updates on its website www.fbmeltd.com .”
Customers have systematically complained to the Financial Mirror that the Special Administrator, Dinos Christofides, has not responded to calls to help them access their accounts and deposits, while many face financial collapse because FBME had been their primary bank.
The whole conflict has also resulted in the suspension of the alternative credit card clearing house, IMSP, owned by FBME Card Services, itself directly owned by FBME Tanzania, causing further havoc to merchants and consumers in Cyprus.
On August 21, the shareholders of FBME Limited said that “a request for arbitration has been filed with the Arbitral Tribunal of the International Chamber of Commerce. This is in reference to the unilateral decision of the Central Bank of Cyprus to sell FBME Bank’s Cyprus branch, which the owners regard as a hostile takeover.”
They said that the arbitration invokes the Lebanese-Cyprus Convention on the reciprocal promotion and protection of investment, dated 5 June 2002, which prohibits any nationalisation or expropriation of the assets of the citizens of either country. It further states that in any dispute the parties will endeavour to settle amicably, which has opened this route to the Paris-based International Chamber of Commerce.
The shareholders said that “the Special Resolution Decree was hasty and ill-judged. It was issued in the wake of the US Department of the Treasury’s FinCEN Bureau’s Notice of Findings and Notice of Proposed Rulemaking, issued in Washington on 17 July. This gave FBME a period of 60 days to respond to the allegations in these notices,” but added that the Central Bank of Cyprus ignored this timeframe and proceeded as resolution authority to take over the bank and suspend its operations.
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