Paphos People

For the first time since Cyprus’ bail in, a depositor who saw their money slashed in the 2013 Laiki Bank ‘haircut’ was awarded over €780,000 in compensation from the government, following a Limassol district court order.

Wednesday’s decision said the haircut on the deposits was due to negligent acts from the Republic of Cyprus and gross negligence from the Central Bank of Cyprus. The attorney-general’s office immediately appealed the decision on behalf of the government and the central bank on Thursday.

This is the first time a court ruled in favour of a plaintiff, as part of a lawsuit which was filed from a depositor against Laiki Bank, its administrator, the Central Bank of Cyprus (CBC) and the government itself. All other lawsuits brought by depositors since the crash have failed.

“The financial crisis which hit Cyprus in 2009 was not handled the way it should have from the government, which is the responsible institution for planning, developing and protecting the economy,” the judge ruled.

“Nor [was it handled] by the CBC, which is the oversight body for the financial system and the proper operation of banks,” which is tasked with protecting deposits, including those of the plaintiff.

As a result, the depositor was awarded €780,832.

It found the government negligent because it did not turn to European mechanisms in time for a loan and then “without seriousness and planning” opted for a loan without knowing the bank’s needs, which were greater than those of the state.

The court also slammed former President Nicos Anastasiades himself, whose statements that he would never allow a haircut on deposits, led the plaintiff not to withdraw their savings from the bank. As a result, the depositor was found to have suffered real damage through their loss from the haircut.

Anastasiades’ statements, seen as a representative of the state, embroil the Republic of Cyprus in its responsibilities towards the plaintiff.

Though the government had an obligation to know that states would support the banks that could not recapitalise themselves, it was faced with dilemmas when the loan it requested was not approved. Nonetheless, the court found fault with the government’s “unwillingness to take measures for wage cuts and to meet the conditions to secure a loan”.

Where the Central Bank of Cyprus is concerned, the court said in its judgement that it “allowed the banking sector to expand without control or protection of depositors’ interests and without taking measures to address the lack of liquidity, which since 2010 was found by the CBC itself to be under pressure”.

“No effective measures were taken to correct the financial problems faced by Laiki Bank and the CBC was dragged behind the actions of the government, which stubbornly refused to take measures to improve the state’s finances,” the ruling said.

It stressed the central bank did not act independently, as it should have, and did not evaluate the government’s failures.

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Dave
Moira And Dave

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