The failure to find investors to buy ex Laiki Bank`s (now absorbed by the Bank of Cyprus) overseas subsidiaries and the judicial proceedings initiated by Laiki, through its Administrator, against third parties with major economic claims were the two obstacles that have not allowed the conclusion of the consolidation process of the Laiki Bank and its entry into liquidation process, according to the Finance Minister Harris Georgiades.
The legal advisor of Laiki`s Administrator Panayiotis Neocleous said that “the Administrator wants to sell off bank assets as soon as possible because their value decreases with each day that passes by”, noting that “if Laiki`s consolidation regime turns into liquidation regime then Laiki`s percentages in overseas subsidiaries will directly be transformed into percentages equal to zero.”
Speaking before the House Committee on Finance, which was briefed on the administration of the former Laiki Bank and the prospects of the bank to exit from the resolution regime, the Minister noted that “everyone wanted the consolidation process to be completed as soon as possible”, adding that “if the consolidation process was completed and Laiki entered into liquidation process there would be a great and imminent danger the national central banks of the countries where Laiki`s subsidiaries are operating in to intervene immediately closing down subsidiaries and perhaps losing all assets. ”
He pointed out all efforts to sell subsidiaries should be exhausted and noted that it is not easy to find investors, while he expressed the view that the upcoming hiring of consultant from the Resolution Authority will accelerate the process.
In relation to the second obstacle relating to court proceedings initiated by Laiki, through its Administrator, Georgiades said that “Bank`s entry into liquidation regime will put legal proceedings in danger of undermining the claims, which are important”. He noted that these issues would be evaluated by the resolution authority comprising the CBC Governor and the two executive members of the Board of CBC.
In relation to the possibility of Laiki`s assets to be distributed to beneficiaries, with the current resolution regime, Minioster said that “the distribution could only be done within the context of a liquidation process and not a consolidation one”.
Regarding the issue of the management of Laiki`s assets to be handled by the creditors of the bank, Minister said he had no objection if a way could be found so that the creditors of the banks would be responsible for the management adding, however, that a legal problem has arisen which was brought before the court that ruled that only Central Bank has the right to take such a decision and initiate the procedures for granting the management of assets to the creditors.
Under the €10 billion bailout Cyprus received from the Troika (EC, ECB and the IMF) Laiki Bank, Cyprus` second largest bank, went into liquidation, while deposits below €100,000 as well as its assets were absorbed by Bank of Cyprus.
