BANKING: Cyprus told to ‘back off’ from FBME sale

This follows a similar request last week by the Attorney General who asked members of parliament to refrain from debating the issue, for fear of jeopardising the outcome of the process currently underway.
On Friday night, the Paris-based Arbitral Tribunal of the International Chamber of Commerce advised the Republic of Cyprus not to take any further action with regard to the sale of the Cyprus branch of FBME, or to take more funds from FBME to the Central Bank of Cyprus and to make no attempt to close the branch while discussion is continuing with regard to interim measures to protect the branch.
The Financial Mirror estimates that about 270 mln euros may have already been removed from the FBME balance sheet and placed by the Central Bank in escrow with the Bank of Cyprus, widely rumoured as the potential buyer of the Tanzania-based bank’s local branch.
In recent weeks, some 140-150 mln euros in depositors’ and the shareholders’ money has been removed, while a further 120 mln had been lifted and taken to Bank of Cyprus last August.
Adding insult to injury, although the order came from the Central Bank-appointed administrator, customers and depositors who need access to their own funds are charged a penalty, burdening them with additional costs and unnecessary trouble.
“These people are just causing us harm,” one financial services company official in Limassol told the Financial Mirror.
“We never really understood why FBME had to be placed under resolution and why they are causing us all this trouble. Don’t they realise that we are giving Cyprus a bad name just by telling our clients and associates of this ridiculous situation?” he said.
The Financial Mirror has learned that other legal attempts are also underway that may result in the bank resuming some of its activities, but that all depends on the ongoing process at the ICC.

PROCEDURAL ORDER
On Friday, the Arbitral Tribunal at the ICC issued its first outcome from its deliberations, known as Procedural Order No. 1, effectively putting a halt for the time being to further actions that may still be taken by the Central Bank of Cyprus as the Resolution Authority, and the appointed Special Administrator, against the FBME Bank branch in Cyprus while the Tribunal studies the case.
The arbitration process started on July 21, 2014, when the Resolution Committee, authorised by the Resolution Authority, announced its intention to sell the FBME Bank branch in Cyprus. Pursuant to the bilateral agreement on the reciprocal protection of investments between Cyprus and Lebanon, the shareholders of FBME Bank resorted to the ICC for arbitration. This was filed on October 28, 2014.
The shareholders asked the Tribunal to settle the dispute before irretrievable damage is caused to the FBME Bank branch in Cyprus by the Central Bank of Cyprus, the Resolution Authority and the appointed Special Administrator and are seeking compensation for damages of at least $500 mln.
The Central Bank of Cyprus took over the Tanzania-based bank’s management last year, placed its operations under resolution and embarked on finding a buyer after the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) named FBME as “a financial institution of primary money laundering concern”. To this day, the FBME shareholders deny the allegations and resorted to the arbitration court to have the liquidation and resolution orders lifted.
The chairman of the Association of Russian Businessmen in Cyprus, Yuri Pianykh, was quoted by the Cyprus Mail as saying earlier this month that the suspension of the FBME’s operations disrupted Russian business activity in Cyprus.

INTERIM ORDER
The Nicosia district court rejected an application by the shareholders in December who sought an interim order to halt the expropriation and sale of the FBME branch.
Meanwhile, the FBME Bank case was due to be heard at the House of Representatives on February 17, but the hearing in the Watchdog Committee was postponed as a result of a plea from Attorney General Costas Clerides who said that details might emerge that could harm the case of the Republic and the Central Bank in the courts of Cyprus and at the arbitration hearings in Paris. He had also declined to attend the hearing himself.
In accepting the request, members of the parliamentary committee made clear that it would be re-staged at a later date.
MP Aristos Damianou was quoted in the local press as saying that although the committee did not want to hurt the interests of the state, its decision should in no way be taken as an indefinite postponement.
“On the contrary,” he pointed out, “those responsible for handling the matter will be called, as part of the parliamentary control, to account for their actions, inactions or omissions.”
Damianou added that MPs do not want “… any parliamentary discussion to create an excuse for actions that happened in the past by whichever institution … nonetheless we are concerned about the prior handling (of the FBME case) by leading institutions of the Republic, which could potentially end up costing the Republic several millions”.
Parliamentary sources told the Financial Mirror that FBME Cyprus had not been invited to the hearing. The list included the Central Bank of Cyprus, its Administrator, the Attorney General, the head of Police Financial Crime Squad Mokas, representatives from the Ministry of Finance, and the head of the Cyprus Bankers Association.