Report by the Committee of Inquiry over Cyprus Economy & Banks

7/27/2019 Report by the Committee of Inquiry over Cyprus Economy & Banks

1/179

1

. . . . ,

28 , 2013


2/179

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1.0 .....06

2.0 .21

3.0. ...22

3.1. .......22

3.1.1 X......22

3.1.2 ..25

3.1.3. . 29

3.1.4 .29

3.1.5. ..31

3.1.6 . ..34

3.1.7 . 35

3.2. ..36

3.2.1. . 36

3.2.2. ..43

3.2.3 ...49

3.2.4 51

3.3. .. ....55

3.3.1 .55

3.4. 58

3.4.1. ..58

3.4.2. ..60

3.4.3. ..61


3/179

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3.5. .....66

3.5.1. ...66

3.5.2. .69

3.5.3. ...71

3.5.4. . ..73

3.5.5. ..76

3.5.6 ...79

3.5.7 ...83

3.5.8 87

3.5.9 ..91

3.5.10 ..96

3.5.11 ....99

3.5.12 .103

3.5.13 ..109

3.6 .114

3.6.1 ..114

3.6.2. ..116

3.6.3 . ......118

3.7 ..121

3.7.1. ...121

3.7.2 . ..124

3.7.3 ......126

3.7.4 ...130

3.7.5 . 134


4/179

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3.8.2 . ...146

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5.0. .....176


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17/179

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() The Commission of Inquiry is not a court or tribunal and has no authority

to determine legal liability.

() Further, a Commissioner may make findings of misconduct based on the

factual findings, provided that they are necessary to fulfil the purpose of

the inquiry as it is described in the terms of reference.

() One of the primary functions of public inquiries is fact-finding. They are

often concerned, in the way of public shock, horror, disillusionment or

scepticism, in order to uncover the truth.

() A public inquiry into a tragedy would be quite pointless if it did not lead to

identification of the causes and players for fear of harming reputations

.

() I doubt that it would be possible to meet the need for public inquiries

whose aim is to shed light on a particular incident without in some way

interfering with the reputations of the individuals involved.

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53/179

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60/179

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62/179

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65/179

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66/179

66

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67/179

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3.5.

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68/179

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69/179

69

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2011 2012.

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ICFCBS

2012 ( ) : We

found that a common cause behind many of Cyprus problems lay in culture

and attitudes. A frequent observation by people we speak to, was that the

Cyprus establishment was too closed, that personal and political relationships

played too great a role in the management of its business affairs, and that it


70/179

70

needed to be more open to different ideas and belief. We agree. We found it

striking for example, that there are few non Cypriots on the boards.

.

,

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71/179

71

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600 3 33

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195

84%. 142

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. :

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110% .

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791

384 .

.

450 .


72/179

72

2007 -

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456 .

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73/179

73

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495 62 .

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risk free

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.


74/179

74

,

checks and balances .

3.5.4. .

, .

ICFCBS ( ) :

Two characteristics of Cyprus of the banking methods contributed to the bad

loan problem at the heart of the crisis. One was the practice of advancing

loans against collateral (usually real estate) and personal guarantee, with

insufficient attention paid to cash flow and ability to repay.

( , ):

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, ,

developers, .

.. , ,


75/179

75

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2011, 24 500 198 580

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114 ,

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.


76/179

76

,

5

2006, 19 950 2012.

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13 9 ,

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80 680

SFS. 8

820 .


77/179

77

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QUALITY 2 830

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78/179

78

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. ,

.

TAMASOS HOTELS ENTERPRISES

-

. , ,

, ,

, , .

,

NEW MARATHON TOURS.

.

NEW MARATHON TOURS

. ,

, .

.

, :

.

.

193 ,


79/179

79

CMS CUSTOMERS MANAGEMENT SERVICES

,

, , ,

, . ,

1 285 .

502 ,

,

.. 502

. , ,

769 , 502

.

,

, .

. ,

.

,

, , 199

. ,

.

570 .

199 , 107 ,

, , .


80/179

80

3.5.6. .

,

, 07/09/2006 14/05/2008,

.

,

, , .

1990 2002 Alpha Bank

Ltd. Alpha

Bank Romania.

,

. ,

2005.

,

110% ,

100% 100%

95% ,

.

, 668

,

2

. 668

, : 2

, , ,

,

.


81/179

81

,

. .

. ,

,

,

.

.

, :

,

, element

, , ,

, .

, , ,

, , ,

.

, ,

,

, ,

.

.

,

500 , 2009.


82/179

82

Uniastrum,

Uniastrum.

14/05/2008,

.

- Uniastrum,

, .

Barclays .

Barclays

Uniastrum

Uniastrum

Barclays,

, , ,

.

, .

,

, .

.

ICFCBS

Weak Bank Governance, ,

,

, ,

. , :

.


83/179

83

,

, : . , ,

, ,

culture

.

, ,

, .

2007,

,

, ,

.

,

,

.

2013

,

, : ,

.

,

,

,

.

, :


84/179

84

,

HSBC

. , ,

70% .

.

,

, ,

. , ,

.

,

, , , 50 100

,

, .

, ,

,

, .

.

3.5.7. .

,

1991 14/5/2009,

. , ,

.

,


85/179

85

.

, ,

, ,

: 2006 - 52 98

- , 4 211 . 2007

60 227 , 4

615 . 2008 ,

, 170

187 21 700

, 2009 182 ,

275 , 2010

304 681

2011 319 681 .

, ,

;

2007, , , 80%

,

15% . ,

, ,

.

,

10 2009,

,

.

: , , ,

, .

.


86/179

86

.

.

, 01/03/2010,

,

.

, , ,

,

.

, Moodys

, ,

, ,

.

.

TAMASOS HOTEL ENTERPRISES SIGAN,

,

. , ,

, :

, ,

,

.

.

.

, ,

. ,

,

.


87/179

87

. .

, ,

,

. ,

500 .

.

, : ..

... , ,

.

,

.

,

,

.

,

. ,

,

,

.

2011, .

Uniastrum,

, ,

.


88/179

88

.

.

ICFCBS,

: The main external causes were two. One was the liberalizing

effect of Cyprus joining the EU and the euro, which opened up new markets

and released large amounts of liquidity under a previously tightly controlled

banking system, while simultaneously make it harder for Cyprus to restrain

credit growth with traditional monetary levers

,

.

3.5.8. .

, 2004, 1998

. 2012

.

, , , Uniastrum,

, Eurogroup 2013

.

,

.

. ,

, ,

.


89/179

89

,

,

, 350 . ,

. ,

10/12/2009

,

2010,

, , 2011 stress

test . -

-

.

,

, . ,

. , 25

2012, : a Board of Directors, particularly a Bank Board, is not

just a club of friends .

ICFCBS a Weak Bank Governance,

corporate governance .. ,

, checks and balances.

.

2006 2008.

developers

. ,

, PIMCO ,

, .

Alvarez & Marsal,

19/02/2010.


90/179

90

Uniastrum , ,

.

,

J.P.Morgan Ernst & Young.

. due diligence report Uniastrum, Ernst & Young,

. ,

Uniastrum. Uniastrum ,

,

, Uniastrum , , 700

.

, Risk Committee Audit

Committee. , ,

,

.

, 5 14 .

, , .

, , ,

. :

,

,

, , ,

, , ,

penalty .

, TAMASOS,


91/179

91

... .

,

.

.

retail bank,

. ,

.

investment banks, , .

2009 50%,

, ,

. ,

. , ,

,

, .

, ,

, . ,

,

30 .

.

,

, , ,

.


92/179


93/179

93

, ,

.

, :

2011. ,

.

1/3/2010

,

2012,

, .

, ,

,

.

, ,

, ,

.

,

2009, 50% .

2008 , :

.

, . . , ,

.

Uniastrum,

: , ,


94/179

94

Uniastrum ; O

.

Uniastrum , 700 .

Uniastrum,

: due

diligence ( ) ,

,

escrow,

.

Uniastrum, , 4 ,

2008 ,

.

ICFCBS : When domestic

sources of funding eventually ran out, they used official liquidity support to

fund further expansion, including the fatal step ( ) of

acquiring 5.7bn Euro of Greek Government Bonds (GGBs) which was to cost

them 4.5bn Euro in losses eventually. , ,

.

, , ,

.

, : .

ICFCBS business

methods.

. :

.

2005-2008, ,

,

, ..


95/179

95

, ,

,

. ,

, ,

.

: Culture. We found that a

common cause behind many of Cyprus problems lay in culture and attitudes.

A frequent observation by people we spoke to was that the Cyprus

establishment was too closed, that personal and political relationships played

too great a role in the management of its business affairs and that needed to

be more open to different ideas and people. ,

.

ICFCBS

2012,

2013.

Uniastrum, ,

.

,

, TAMASOS HOTEL ENTERPRISES

.


96/179

96

, ,

, 2012

.

, ,

.

,

,

: , .

, ,

.

, ,

.

, , ,

.

, PIMCO

. , , 2012

,

10 . , ,

, .


97/179

97

3.5.10 .

,

,

:

() ,

() ,

() .

2009 1,7 ,

,

11/12/2009,

, ,

.

06/07/2012,

. . .

, .

, , , ,

2012.

, 01/03/2010,

, ,

,

52 , 2010.


98/179

98

,

. , stress tests .

, , 2009, 1,7

.

2009 3 .

2010, Rating Committee ,

2 .

.

Alvarez & Marsal

.

- TAMASOS HOTEL ENTERPRISES (-),

, - . ,

,

. , ,

,

.

, : ,

,

.

,

. . , .

. ,

2012 ,

. ,

. . .


99/179

99

,

,

, .

ICFCBS, ,

weak bank governance,

. , ,

.

banking methods

,

,

,

, .

,

Eurogroup 2012 ,

: , ,

,

, ,

.

, , : ,

.

Uniastrum,

,

.


100/179

100

,

. , , ,

.

31/08/2012,

.

, : , 31/08/2012

. ,

,

. ,

.

, , ,

, : .

, .

. , , .

. ..

3.5.11 .

,

1980 1993 2004

. 2005

2006


101/179

101

. 2010 .

12/07/2012

.

,

. :

,

.

bonus, , .

,

,

.

2006 2010 18

, ,

. ,

2011,

, .

.

2009,

home country.

2009. ,


102/179

102

2009 , , Stock Watch

10/12/2009.

, .

, 10/12/2009,

, .

, 11/12/2009.

2010 ,

2 124 .

2010.

, ,

.

, ,

,

,

, 19 2010.

, , ,

.

01/03/2010,

,

,

.

.


103/179

103

12 - -

.

ICFCBS

Weak Bank

Governance, .

Alvarez & Marsal

.

. ICFCBS

.

.

, ICFCBS,

, ,

.

,

ICFCBS.

, : .

.

2012, .

,

.

2013

.

.

,


104/179

104

.

, ,

.

,

. ,

ELA, 9,5 .

ELA 19/02/2013 ,

, 1 . ,

, ,

2013

.

Uniastrum,

JPMorgan Ernst & Young

.

, 12

,

.

3.5.12. .

1991 2004. 2005

,

10/07/2012 .

2006 .

,

.


105/179

105

.

, .

, -

() ALCO ,

()

.

10/12/2009

, ,

, ,

.

01/03/2010 ,

2012.

, ,

.

21/12/2005,

,

26/07/2004.

: -

() ,

() ,

()

,

() , ,

, ,


106/179

106

, .

,

, 2011.

, , 31/12/2009

927 .

, ,

10/12/2009 .

2007,

,

.

operations . 2009

,

, .

2009 2010

, , : ..

,

. ,

,

.

Uniastrum,

- 2008.

, Uniastrum

05/06/2008 Moodys , the

change in outlook on Uniastrums deposit ratings reflects its weak financial


107/179

107

performance over the past two years , :

.

Fitch

2008,

Uniastrum. : , , ,

.

Uniastrum,

161 , 539,8

, 235% .

: H , ,

JPMorgan, & s, Ernst & Young,

10 12 ,

, ,

, Uniastrum ...

Stock

Watch Uniastrum,

.

. : To

.

2008,

,

.


108/179

108

.

27/08/2012

Uniastrum ,

.

,

Uniastrum.

.

Uniastrum,

, 200

250 .

, Uniastrum

.

, :

. , ,

.

2011,

,

2011 ,

,

.

,

, ,

. .

, ,

. , ,


109/179

109

.

:

,

, ,

.

H Alvarez & Marsal

, 2010

.

.

2008

10/12/2009

400 .

. ,

.

, ,

. , , ,

.

.

.

, , .

.


110/179

110

, ,

,.

, ,

,

, 33

..

ICFCBS

,

.

, Eurogroup

ELA

.

3.5.13. .

O

2007. 2012

- , .

10/12/2009

1,7 .

180 . ,

150

, 15/12/2009, 250

. ,

, ,


111/179

111

,

. ,

, 02/03/2010

. ,

,

.

13/05/10

.

.

,

10/12/2009 .

, ,

01/03/2010 ... ,

,

01/03/2010 .

27/04/2010 Standard & Poors Moodys,

14/06/2010 .

,

. ,

.

, : ,

,


112/179

112

2

,

..

,

. .

Stock Watch

,

.

,

.

To

, . ,

2006-2011. 42

. , , ,

.

2008,

2007.

. ,

, :

,

.

, .

, 2012, ..


113/179

113

.

,

. ,

,

.

To 2006

2011 126%, 12,8 28,9 .

, .

, 2 ,

: ,

, , , ,

, ,

, - 280

- .

, , ,

AMASOS HOTEL ENTERPRISES

, 2 813

. ,

, .

, :


114/179

114

, ,

.

Alvarez & Marsal

there appears to have been a luck of formal governance

around major decisions and actions, 100%.

11.1()

, , ,

. ,

.

, ICFCBS

, -

() Business methods,

() ,

() .

weak bank governance,

, , .


115/179

115

3.6.

3.6.1

,

2012. 2012,

,

. ,

, 2004 2005. ,

:

()

, 3,5 ,

() ,

() ,

.

, 50%

, . , ,

.

2012.

.


116/179

116

,

50

.

. ,

. ,

85% ,

, 1,8 .

,

ELA 3,8 .

ELA, .

, .

,

,

.

ELA , 2012 9,6

. , ,

,

3,8 ELA.

1,19 ,

2012, ,

, .

, 200

2010, 1,6 2011.


117/179

117

ICFCBS

,

.

.

,

.

,

,

, 2012.

.

.

2012, ,

.

, , ,

.

3.6.2. .

09/08/2012

, ,

. ELA :-

()

,

() (repos.) .


118/179

118

,

. ,

2013,

. ,

, .

2013,

,

,

, .

2012,

8,5 .

.

,

, . , ,

, ,

.

, . ,

30 .

, ,

2011.

,

internet banking.


119/179

119

,

.

,

3 .

3.6.3. .

,

, HSBC 21,6%,

, Marfin Investment Group (MIG) TOSCA Fund.

, HSBC

.

,

HSBC . ,

,

, 51%.

5%.

HSBC Marfin Tosca Fund,

.

,

, 6

, 2005, ,

HSBC

, ,

50%

. , ,

. ,


120/179

120

Johnny Crichton, Head of International,

SBC ( 101).

,

HSBC, 23/06/2005,

.

HSBC

( 102).

HSBC ,

,

,

HSBC,

,

,

.

,

MIG Tosca Fund.

,

Marfin ,

, 17

Marfin - : .

, ,

Marfin Financial Group, ,

.


121/179

121

O Marfin

.. ,

. Marfin ,

HSBC

.

,

: ,

.

17/07/2006.

- Marfin - ,

, merge.

. ,

,

. ,

,

.

.


122/179

122

3.7.

3.7.1. .

01/05/202 01/05/2007.

Marfin Tosca Fund

Laiki nominees, 2 2006.

, ,

,

, ,

.

- - ,

06/07/2006.

Tosca Fund,

Marfin.

, .

Marfin

19%. 07/02/2006,

HSBC ,

.

, 2006,

(Memoranda) ( 98) .


123/179

123

...

, ,

HSBC : .

MARFIN

.

,

Marfin

Tosca Fund. 26/06/2006

( 82) :

,

Marfin Financial Group Holdings S.A.,

Tosca Fund

HSBC.

Marfin Financial Group Holdings S.A.

. ,

, ,

, 19% .

. ,

( 97() ),

Marfin

20%.

, ..

,


124/179

124

Marfin

.

Marfin Tosca Fund.

,

. , ,

Marfin Tosca Fund.

.

Dubai Fund 31%

,

. Dubai

.

HSBC

, ,

, ,

.

,

, ( 99),

.

.

.

.


125/179

125

:

4.869,95 , 13.7%

. 125.02 ,

, . ,

150 .

,

: O

,

.

, ,

.

, , ,

Barclays .

.

3.7.2. .

Uniastrum,

, ,

.

, , 222 , 600

.

, ,

, .

- -


126/179

126

Uniastrum.

Uniastrum 5/6/2008 Moodys Investors Services,

Moodys, 7/6/2008 ( 95).

Moodys, 27/6/2008,

.

- -

. 75%

,

40% . Moodys

Uniastrum

.

Uniastrum 14

96 :

1. Poor corporate governance. 2. Failure to legitimize an indirect beneficial

ownership of certain states in the bank by the two key shareholders. 3.

Significant loan concentration. 4. High portion of loss with unclear substance

and inadequate collateralisation. 5. Poor profitability and cost-efficiency

indicators. 6. Unsophisticated risk management systems. 7. Weaknesses in

the loan process. 8. Absence of a formal policy with regard to related parties.

9. Deficiencies in the tax functions controls and methodology which may

potentially lead to additional tax liabilities 10. Lack of disclosure.

, 2007

,

, .


127/179

127

. -

VIP - .

,

.

4,300 . , , 14

96, According to E & Y due to strong asset growth yet poor internal capital

generation, Uniastrums capital adequacy has become a constraint to its

future development. ,

, ,

,

,

business plan

2008 2009.

,

Uniastrum 31/10/2008, Fitch

. 14

, : Fitch downgraded the Bank of Cyprus long term

issuer default credit rating estimating that the acquisition of Uniastrum Bank in

Russia increases the risks of the credit .

Fitch .

Uniastrum.

3.7.3. .

. 2003.

:


128/179

128

() Uniastrum,

() ,

() ,

() ICFCBS.

Uniastrum

( 14),

,

80% Uniastrum

( 15). , ,

. ,

. , ,

,

, due

diligence

Sales and Purchase Agreement Shareholders

Agreement. , 222, 125

Uniastrum .

Uniastrum

, , /

.


129/179

129

() ,

() Uniastrum

,

()

Uniastrum ,

()

,

Uniastrum.

,

Uniastrum .

, , 05/06/2008

Moodys Investors Services Uniastrum

.2 . ,

.

,

, Ernst & Young.

, Uniastrum

.


130/179

130

, 01/03/2010,

.

. ,

.

, .

ELA

, ,

,

. ELA

solvent,

.

18/05/2012,

, , ,

9 .

ELA, ,

, . , ,

.

,

, , .


131/179

131

ICFCBS

,

.

. , :

governance legal

authorities ,

.

3.7.4. .

.

. ,

Marfin, 07/06/2006,

10%, 19%.

10% .

Marfin Tosca Fund

10% 2006,

, ,

,

, Marfin

.

19/05/2006 Marfin

20%.

19/05/2006 ( 97). ,


132/179

132

25/05/2006, ,

. ,

. .

,

Tosca Fund .

19%

.

07/06/2006 Marfin

19% . 29/06/2006

,

Marfin Financial Group Holdings S.A.

Tosca Fund (. 3 96).

,

.

Marfin Tosca Fund.

,

01/03/2010 ,

29/02/2012.

Alvarez & Marsal

, ,


133/179

133

.

ELA ,

.

,

. , ,

ELA ,

.

.

,

,

, 2013,

, ,

, ,

.

dead line ELA

21/03/2013.

,

,

minimum ,

,


134/179

134

.

. ICFCBS

,

. ,

, , .

,

:

,

.

Eurogroup Eurogroup 25

.

, :-

() Eurogroup ,

() prior action

Eurogroup,


135/179

135

()

.

, ,

,

. , ,

. , ,

.

3.7.5. .

1 2007 2 2012.

2007

,

.

. .

2008

.

. .

15/04/2009

.

1930

.

.


136/179

136

. , .

, .

, ,

.

.

30/04/2012,

.

,

. 17/04/2012

.

,

2012

EFSF, .

2012

.

.

.

.


137/179

137

. ,

, .

,

. ,

.

.

. 01/12/2009

,

.

, 6% 2010

2011. , ,

. ,

. .

.

, . 18/05/2010.

. ,

.

,

.

: ,


138/179

138

.

,

.

,

.

.

.

, ,

.

.

.

18/07/2011.

2011.

, ,

,

,

, 1974.

1974.

15/07/1974

,

, ,

,

38% .

80%


139/179

139

70%

. .

,

.

Uniastrum, , ,

.

,

.

( 96 14).

17/04/2012

. ,

. 2011

2012

ELA. To

, , , ,

4,5 . ,

.

, . 01/03/2010

( 83),

, ,

.


140/179

140

,

,

. ,

,

.

01/03/2010 .

Alvarez & Marsal,

, ,

.

.

- Independent Commission

on the Future of the Cyprus Banking Sector

, ,

.

.

.

,

.

, .

:

() ,

.


141/179

141

()

.

()

200 .

,

.

()

.

() PIMCO

.

3.7.6. .

03/05/2012.

Leicester .

,

.

, .

. ELA - ()

() .

,

.

, ELA ,

,

.. ... . ,


142/179

142

Eurogroup

25/06/2012.

,

, .

ELA,

, .

26/03/2013 :

ELA 9

.

,

.

,

2013. ELA

9,1 .

Financial Times 10/02/2013

, 400

. . ,

1 15/03/2013

550 .

Eurogroup 2013, ELA

21/03/2013. ,

.


143/179

143

Eurogroup : Take it or leave it. .

,

, : , ,

2012,

2011,

.

.

,

, , ,

.

.

,

.

, , .

2012, .

,

,

.

05/10/2012 ( 103)


144/179

144

18/11/2012 ( 104). 104

.

2012

,

ELA .

2012, Memorandum of

Understanding. , ,

.

10 . 1,19

,

06/06/2012

bail-in, .

,

, 01/02/2013.

PIMCO,

3,9 . ,

, .

,

3,4 .

.

,

, PIMCO.

16/03/2013 ,

. internet banking,


145/179

145

10 ,

. ,

, .

. ,

. , .

,

.

banking,

11/12/2012 ( 106),

:

,

toxic assets,

.

21/01/2003 Eurogroup

. , , Eurogroup.

, 107.

,

. , , .

.

ICFCBS ,

weak bank governance .

, :

Alvarez & Marsal.


146/179

146

01/03/2010

, follow-up,

. ,

.

ICFCBS

.

,

,

.

PIMCO

, , PIMCO,

.

PIMCO,

. , , Black Rock ,

, .

04/06/2013

.

:

PIMCO ,

400 , , .


147/179

147

3.8.

3.8.1. .,

25

2013,

.

,

, ,

, ,

,

, , .

3.8.2. ,

2013 1 2013.

29

2012 , 1,19

. ,

1,19 .


148/179

148

, 06/06/2012,

2013 ECOFIN. , ,

. ,

.

, ,

, 01/02/2013

,

bail-in ( 1,6).

, , ,

Eurogroup

2013, .

2013,

. ,

, , ,

.

02/06/2008,

ASTRA,

,

2008.

. : , , ,

,

, 48%,

,

, .


149/179

149

-

- .

:

,

. ,

, ,

2008 ,

.

, 14/10/2008,

,

.

Eurogroup. , ,

, , ,

, .

, , Common Paper on Cyprus

23/07/2013 , ,

bail-in.

16/03/2013

- 17/03/2013 -

Eurogroup,

100

30 .

100 6,75%

, 9,9%.


150/179

150

, ,

ELA .

, ,

,

, , ,

, ,

.

, , ,

- ,

,

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164/179

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Report by the Committee of Inquiry over Cyprus Economy & Banks

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Transcript of Report by the Committee of Inquiry over Cyprus Economy & Banks