Central Bank to absorb legal costs of bondholders

The Central Bank of Cyprus said it would accept requests for reduced legal costs in lawsuits filed by bondholders of the Bank of Cyprus or Laiki Bank, who saw their savings wiped out during the 2013 financial crisis.

According to the CBC, the requests concern lawsuits that have been submitted against it and are about to be withdrawn or lawsuits that have been withdrawn, and payment of legal costs in favour of the CBC is pending.

It also includes lawsuits for which the courts have ruled in favour of the CBC while a decision on legal costs in favour of the CBC is pending.

The Central Bank said that if natural or legal persons notify the bank they intend to withdraw their lawsuit, the CBC will assume up to 80% of legal costs.

As a rule, in both civil and private criminal cases, the losing party in a procedure is ordered to pay all the costs.

Furthermore, the CBC said it would bear the legal fees in full for guaranteed minimum income recipients or companies that have been liquidated.

This also applies to cases already withdrawn or cases for which courts have already ruled in favour of the CBC.

For lawsuits tabled by individuals with an annual gross income under €35,000, it will bear 70% of the legal costs ruled in its favour and 30% in cases that do not fall in the above criteria.

On July 10, the CBC will publish on its website the detailed procedure under which the applicants should submit their requests by September 8.

During the 2013 financial crisis, Laiki Bank, Cyprus’ second-largest lender, was liquidated, with depositors over €100,000 losing up to 80% of their money.

Furthermore, its convertible bonds were wiped out.

Largest lender, the Bank of Cyprus, requested financial assistance with the bondholders wiped out as part of the bailout.

According to the IMF, convertible bonds amounting to €1.3 bln were scrapped, €0.8 bln in Laiki Bank and €0.5 bln in Bank of Cyprus.

Under the bailout agreement, the Bank of Cyprus was capitalised using the bail-in tool, under which 46.5% of uninsured deposits (over €100,000) were converted to equity.