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22 May, 2024
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Russian depositor triumphs over Laiki bank's 2013 haircut

Government appeals historic Laiki bank verdict

Newsroom / CNA

The Legal Service, on behalf of the Republic of Cyprus and the Central Bank of Cyprus (CBC), will appeal the decision of the Limassol District Court, which awarded compensation to a depositor of the former Laiki Bank for the 2013 deposit haircut, according to CNA.

This is the first case since 2013 in which a shorn depositor was vindicated. The Limassol District Court granted €780,833 to a Russian depositor of the former Laiki Bank. The decision was filed in 2013 and amended twice. Based on the latest amendment of the indictment, the defendants were the special administrator of Laiki Bank, the CBC and the Republic of Cyprus.

The Eurogroup imposed a haircut on uninsured deposits in March 2013, as part of the bailout of the Cypriot economy amid the financial crisis. Data from the International Monetary Fund show that the total haircut on deposits was about €8 billion, of which €3.7 billion in the then Laiki Bank, which went into liquidation.

Adonis Papanastasiou, president of the Depositors Association of the former Laiki Bank (SYKALA), told CNA that the difference of yesterday's decision was that the judge did not limit himself to the CBC's arguments that the decisions in 2013 were made to save insured depositors (under €100,000), but examined the previous actions and failures of the government and the CBC, which, as he said, caused the crisis of 2013.

He mentioned as an example the haircut on Greek government bonds (Psi), which resulted in losses of €4.5 billion for Cypriot credit institutions.

"One cannot start and say that in 2013 we were in this situation, because there were others before that," Mr Papanastasiou said, adding that he believed the judge was able to scrutinize them through the evidence presented to him.

Papanastasiou also said that the CBC did not exercise the necessary supervisory control and the banks were liable, since they bought Greek bonds when European banks sold them.

"The golden boys of the banks were paid according to the profits that the banks had on their balance sheets," he said, recalling that a similar thing had happened in the stock market crisis of 2000.

He also noted that the invocation of the public interest was the "pool of Siloam, where the guilty are placed and cleansed".

When asked if this decision would be a precedent, Papanastasiou said any final ruling could be a precedent. However, he added that "there is this case, which was successful, but also other decisions where the outcome was negative."

"I assume that the people we pay, the CBC and the Legal Service, will again hire expensive lawyers to appeal it. They have the resources, while depositors have been slaughtered," he added.

Unknown number of pending cases
When asked how many cases are pending before the courts on behalf of Laiki's shorn depositors, Mr Papanastasiou said he did not know, since the Supreme Court had rejected a request from the Association for a pilot case to be tried for all.

"There are too many cases, there are too many lawyers involved. It is hard to give an answer about the number of pending cases," he said.

The online platform will open in December for applications from those affected by the 2013 decisions (shorn depositors, securities holders and shareholders) to apply for support from the Solidarity Fund established by the government, with the first payments expected in 2024.

Cyprus  |  laiki  |  banks  |  economy  |  money

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