CYPRUS: Second Central Bank board member quits

5 mins read

Former University of Cyprus Rector economics professor Stavros Zenios resigned from the Central Bank board on Friday, saying the credibility of the institution has been damaged, at a time when the troubled economy needs guidance out of the present crisis.

Zenios’ departure follows the announcement by Executive Director and former Trade Minister Stelios Kiliaris that he too would resign in April, following an issue of conflict of interest by the Governor and her allegations that the island’s Deputy Attorney General was involved in a bribe scandal with a law firm tasked with recovering assets on behalf of now-defunct Laiki Popular Bank.
On his way out, Kiliaris also told a parliamentary hearing that Governor Chrystalla Georghadji had a list of 29 MPs who had non-performing loans, which was subsequently leaked to the media.
Attorney General Costas Clerides was duly summoned to the Presidential Palace to see if there was any legal ground to seek Georghadji’s sacking, and has hired a respected former judge to head the probe and report back within ten days.
Announcing his resignation, Zenios, who has participated on several bodies advising the present and past governments on reviving the economy, said that he “could not remain an impassive member of an institution that seems to be satisfied with the logic of procedural management, instead of carving a policy and influence on decision making at a local and European level that would help drive (the country) out of the crisis.”
He added that following the tragic events surrounding the actions of the Central Bank Governor, the institution’s credibility has been eroded and that sacrifices are needed to allow the Central Bank to conduct its work with authority and to the benefit of the economy.
Zenios said that he had written several times to the Governor pointing out the fundamental problems of the CBC and suggesting changes.
“Unfortunately, when the Governor is being disputed due to the conflict of interest and clumsy handling of the matter, it is extremely difficult for the Bank to conduct its work and regain the trust of the society and the state. The Board indicated the dysfunctions that the conflict of interest was causing. Unfortunately, we were not heard.”
“I cannot speak publicly about renewal, reforms and transparency, and continue to serve an unreliable institution,” Zenios said, adding that “the Resolution Authority (in effect, the CBC), the Special Administrator and the lawyers for Laiki slowed (in their duties) for a year and a half and today the Central Bank’s board is being criticised, despite being appointed in July 2014. The delay has caused irreparable damage.”
Zenios was also critical of Finance Minister Haris Georghiades saying the Minister, too, had a share of the responsibility and remained passive.
But he also threw a salvo in another conflict, that of Tanzanian-owned FBME Bank, that was suspended by the Resolution Authority and another Special Administrator appointed, which has left the case in the hands of the International Chamber of Commerce tribunal in Paris and causing great damage to the reputation of Cyprus.
“My written proposal to conduct an internal investigation was rejected. The Executive Directors (Kiliaris and George Syrichas) and the Governor jointly decided how to handle the FBME case and I am deeply concerned about their handling of the case.”
Praising the work of his fellow non-executive board members, Zanios described technocrat and long-term Central Bank manager Syrichas as “very cautious”.
“My cooperation with them was as impeccable as was our genuine desire to contribute to the work of the Central Bank. They do not deserve the critical attacks aimed at them.”
He concluded that the only way forward is for the Central bank to stop being a single person’s domain and that a collegiate-type of management be introduced, with fully independent non-executive members, such as Court of Directors of the Bank of England and the Executive Board of the German Bundesbank.
Meanwhile, the CBC staff staged a one-hour walk-out on Thursday, prompted by the bank employees’ trade union ETYK, saying that the fracas surrounding the conflicts of interest of the Governor, resignations and public criticism was also affecting their work and the credibility of the institution.