Odysseas says Harris was being stubborn

The auditor general is pointing fingers at the finance ministry’s handling of the Cyprus Cooperative Bank affair, telling an independent investigation committee that some actions were misleading.

During an ongoing investigation committee hearing on Monday, Auditor General Odysseas Michaelides said that the finance ministry misled members of the Cabinet last year when distribution of free shares was approved on May 29.

According to Michaelides, the finance ministry knew full well that the Republic of Cyprus had made a number of commitments to the European Commission. He added that the Single Supervisory Mechanism had warned against giving out free shares but the minister kept quiet on that piece of information during the Cabinet meeting.

“He was openly lying,” Michaelides told investigators referring to Finance Minister Harris Georgiades.

The auditor also shared with the committee a number of letters and correspondence, reportedly referring to the issue of drawing capital well over the initial amount of €200 million, while there were indications towards the end of 2017 pointing to CCB losses between €0.5 and €1 million.

“While the ship was sinking, up until even May 2018, they were still writing memos on free shares. I believe this shows amateurism, hastiness, inability, and stubbornness in dealing with a very serious matter,” the auditor said.

Even though the deal did not go through and investigators asked the auditor about the significance of the free shares, Michaelides said they were determined to make it happen even through the use of legislation. 

During his sworn testimony, Michaelides also drew a connection between the hiring of Nicholas Hadjiyiannis as CCB Chairman and the latter’s role in picking Altamira as the asset manager for non performing exposures.

CCB and Altamira had launched an effort in 2017 to tackle jointly the NPL’s of the co-op, with Georgiades praising the decision as a decisive step towards dealing with NPL’s.

But the audit office had noted that the bank executives put the institution in a bind when they proceeded with only one bidder for the bad asset management, without allowing for alternatives.

Michaelides spoke in very unfavourable terms over the deal, assigning direct blame to Hadjiyiannis and indirectly blaming Georgiades for not stepping in.

According to local press, the auditor general made comments on an open secret as to the relationship between the finance minister and the bank chairman, telling investigators the two men had gone to the same high school and even studied together in their college years.

“But this doesn’t mean anything,” Michaelides added.

Earlier this summer, the House voted in an emergency session 32 against 20 to approve state guarantees amounting to €2.6 billion granted by the government to Hellenic Bank for the absorption of the healthy portfolio of the CCB.

It also approved five bills and draft regulations aimed at enhancing the legal framework that ought to facilitate the reduction of NPLs, one of the major burdens of Cyprus’ banking sector.