The Cyprus Development Bank (CDB) announced that the Council of Ministers has appointed new board members to replace the two who resigned in March.
The new members are Nicos Hadjinicolaou, a senior officer and later board member of the Laiki Bank Group, and Marios Kleitou, a member of the Institute of Chartered Accountants of Cyprus and a Fellow of the Institute in England and Wales, as well as a member of the Financial Consultants’ Association of Cyprus.
The board resignations followed the multiple scandals involving deals made by the CDB’s previous General Manager and members of the board.
Members of the House Watchdog Committee met behind closed doors in mid-March to hear allegations of mismanagement, which led to CYP 20 mln in losses in 2003 as a result of sour loans, while the CDB was also involved in other scandals pertaining to investments in the shares of AremisSoft and a dispute with the Bank of Piraeus.
The current bank chairman, Andreas Mouskos, had acknowledged that the losses were mainly as a result of precarious debtors and bad management, adding that the CDB had appointed external auditors (E&Y) to report on the period in question.
Discussing the retirement package of CYP 400,000 offered to the departing Managing Director, John Ioannides, and the benefits paid to a number of officials, Watchdog Committee Pourgourides had said: “At first sight, they are considered excessive.”
The CDB was also reportedly involved in a lawsuit against the Bank of Piraeus over a dispute involving an investment made in Global Capital on behalf of the Greek bank by the CDB, which the Greek side refuses to accept.
The lawsuit refers to an investment made by the CDB in 2001, acquiring the 30% of the share capital or 388.349 shares of Global Capital for CYP 1.7 mln.
The CDB claims that it bought the shares on behalf of the Greeks, based on a verbal agreement. The Greek side refuses to acknowledge the deal, but CDB officials believe they have a good case, which rests solely on testimony that Ioannides has agreed to give on behalf of the CDB.
This is also the reason why according to newspaper reports the CDB was not pressing charges against Ioannides, lest it lose him as its main witness in the case.
Following reports about its financial status, the CDB issued a statement clarifying that the Council of Ministers confirmed on March 30 debt due to the bank of about CYP 13 mln, plus interest. The debt emanates from government guarantees on previous interest and exchange rate risks.
The Government holds about 88% of the issued share capital, whereas the European Investment Bank holds about 12%.
The CDB satisfies the Central Bank threshold on capital adequacy and the government has approved plans to issue new Tier I and Tier II capital.
The provisional accounts for 2004 show significant improvement compared to the previous year with only marginal losses.
