The Best Cyprus Community

Skip to content


How the banking sector was destroyed

Benefits and problems from the EU membership.

How the banking sector was destroyed

Postby Tim Drayton » Mon Sep 09, 2013 12:58 pm

In yesterday’s Sunday Mail there appeared an excerpt of the written statement submitted by the former governor of the Central Bank Athanasios Orphanides to the investigative committee for the economy last month, in which he gives a chronological account of how the actions and decisions of the AKEL government and the Central Bank led to haircut of deposits and destruction of the banking sector.

To summarise, he claims that AKEL, purely in a desperate attempt to shore up its position in the run up to the presidential elections, wished to cast the banks, rather than the government, as the main villains behind the economic crisis. To this end, at a time when he alleges the government had run up debts of 7-8 billion euros and the banks had debts of only 2 billion, the AKEL administration pressurised the central bank to inflate the size of the banks’ debt, and they put pressure on the auditors PIMCO to do the same, with the result that the banks’ debt was inflated by a factor of five, thus appearing to exceed the amount of debt run up by the government, which, Orphanides alleges, suited AKEL’s propaganda purposes. The point here is that, if the real amount of debt was less than 10 billion euro, this amount would have been deemed sustainable and the troika would have given financial support without any haircut being necessary.

Orphanides goes on to argue that the AKEL regime in its dealings to secure an EU bailout, purely to further its own propaganda, exaggerated the problems faced by the country’s banks and tried to put all the blame on the “casino banking” that they had engaged in. This had the effect of destroying confidence in Cyprus’ banking system and contributed to the collapse that was experienced.

I have no way of independently verifying Orphanides’ claims, but if they are true, AKEL is responsible for the destruction of this country. If so, this is surely an act of treason.

I wonder how credible these claims appear to be to other people?

The full article:

How the banking sector was destroyed

http://www.cyprusnews.eu/cyprusmail/143 ... royed.html
User avatar
Tim Drayton
Main Contributor
Main Contributor
 
Posts: 8226
Joined: Sat Jul 21, 2007 1:32 am
Location: Limassol/Lemesos

Re: How the banking sector was destroyed

Postby CBBB » Mon Sep 09, 2013 1:38 pm

From everything I have read (lots!) from many different sources, Orphanides description of what happened appears to be pretty close to the truth.

I also think that one way or another, the Government is going to get AKEL for what they have done to us.
User avatar
CBBB
Leading Contributor
Leading Contributor
 
Posts: 11435
Joined: Tue May 20, 2008 1:15 pm
Location: Centre of the Universe

Re: How the banking sector was destroyed

Postby Tim Drayton » Mon Sep 09, 2013 2:09 pm

On the other hand, and just to play devil's advocate, surely the Troika would not simply work on hearsay and would have checked the books themselves and would have employed some sharp financial analysts to do this - surely they would have spotted some inconsistencies if the banks really only owed 2 billion instead of 10? We are hardly talking about small change here! Why would they accept so much at face value, included accusations about "casino banking", from a government which, according to Orphanides, had lost all credibility in their eyes.
User avatar
Tim Drayton
Main Contributor
Main Contributor
 
Posts: 8226
Joined: Sat Jul 21, 2007 1:32 am
Location: Limassol/Lemesos

Re: How the banking sector was destroyed

Postby kimon07 » Wed Sep 18, 2013 4:38 pm

Tim Drayton wrote:I have no way of independently verifying Orphanides’ claims, but if they are true, AKEL is responsible for the destruction of this country. If so, this is surely an act of treason.....


The favorite preoccupation of AKEL since it was formed.
kimon07
Main Contributor
Main Contributor
 
Posts: 3386
Joined: Sun Oct 16, 2011 9:22 am

Re: How the banking sector was destroyed

Postby GreekIslandGirl » Wed Sep 18, 2013 11:02 pm

Just sounds like the old game of Capitalists trying to blame Communists. :roll:

Disgusting!

We need the truth. Not stupid men's game-playing!
User avatar
GreekIslandGirl
Main Contributor
Main Contributor
 
Posts: 8954
Joined: Sat Oct 15, 2011 1:03 am

Re: How the banking sector was destroyed

Postby kurupetos » Wed Sep 18, 2013 11:36 pm

GreekIslandGirl wrote:Just sounds like the old game of Capitalists trying to blame Communists. :roll:

Disgusting!

We need the truth. Not stupid men's game-playing!

I blame both. They are the two faces of the same coin, which was minted by the Zionists! :twisted:
User avatar
kurupetos
Leading Contributor
Leading Contributor
 
Posts: 17911
Joined: Tue Jul 31, 2007 7:46 pm
Location: Cyprus

Re: How the banking sector was destroyed

Postby Paphitis » Thu Sep 19, 2013 3:46 am

Tim Drayton wrote:In yesterday’s Sunday Mail there appeared an excerpt of the written statement submitted by the former governor of the Central Bank Athanasios Orphanides to the investigative committee for the economy last month, in which he gives a chronological account of how the actions and decisions of the AKEL government and the Central Bank led to haircut of deposits and destruction of the banking sector.

To summarise, he claims that AKEL, purely in a desperate attempt to shore up its position in the run up to the presidential elections, wished to cast the banks, rather than the government, as the main villains behind the economic crisis. To this end, at a time when he alleges the government had run up debts of 7-8 billion euros and the banks had debts of only 2 billion, the AKEL administration pressurised the central bank to inflate the size of the banks’ debt, and they put pressure on the auditors PIMCO to do the same, with the result that the banks’ debt was inflated by a factor of five, thus appearing to exceed the amount of debt run up by the government, which, Orphanides alleges, suited AKEL’s propaganda purposes. The point here is that, if the real amount of debt was less than 10 billion euro, this amount would have been deemed sustainable and the troika would have given financial support without any haircut being necessary.

Orphanides goes on to argue that the AKEL regime in its dealings to secure an EU bailout, purely to further its own propaganda, exaggerated the problems faced by the country’s banks and tried to put all the blame on the “casino banking” that they had engaged in. This had the effect of destroying confidence in Cyprus’ banking system and contributed to the collapse that was experienced.

I have no way of independently verifying Orphanides’ claims, but if they are true, AKEL is responsible for the destruction of this country. If so, this is surely an act of treason.

I wonder how credible these claims appear to be to other people?

The full article:

How the banking sector was destroyed

http://www.cyprusnews.eu/cyprusmail/143 ... royed.html


The banks were only a very small part of the problem.

I too must agree with CBBB. Christofias could have managed this crisis earlier on and chose to bury his head in the sand whilst trying to cover up his financial mismanagement. He had one motive, which was AKEL's re-election.

The RoC Government did destroy confidence in the Banking System, and once there is no confidence the entire financial system falls apart. It is a system that relies very heavily on confidence.

The Cypriot People will have to be stupid to re-elect AKEL ever again.

I hope CBBB is correct in saying that this Government is going to punish AKEL very hard for doing what they did to Cyprus!
User avatar
Paphitis
Leading Contributor
Leading Contributor
 
Posts: 20971
Joined: Sun May 21, 2006 2:06 pm

Re: How the banking sector was destroyed

Postby observer » Sun Sep 22, 2013 12:29 pm

This is an article that first appeared in Punch magazine in 1957... it appears little has changed between then and now.


Q: What are banks for?

A: To make money.

Q: For the customers?

A: For the banks.

Q: Why doesn't bank advertising mention this?

A: It would not be in good taste. But it is mentioned by implication in references to reserves of £249,000,000,000 or thereabouts. That is the money they have made.

Q: Out of the customers?

A: I suppose so.

Q: They also mention Assets of £500,000,000,000 or thereabouts. Have they made that too?

A: Not exactly. That is the money they use to make money.

Q: I see. And they keep it in a safe somewhere?

A: Not at all. They lend it to customers.

Q: Then they haven't got it?

A: No.

Q: Then how is it Assets?

A: They maintain that it would be if they got it back.

Q: But they must have some money in a safe somewhere?

A: Yes, usually £500,000,000,000 or thereabouts. This is called Liabilities.

Q: But if they've got it, how can they be liable for it?

A: Because it isn't theirs.

Q: Then why do they have it?

A: It has been lent to them by customers.

Q: You mean customers lend banks money?

A: In effect. They put money into their accounts, so it is really lent to the banks.

Q: And what do the banks do with it?

A: Lend it to other customers.

Q: But you said that money they lent to other people was Assets?

A: Yes.

Q: Then Assets and Liabilities must be the same thing?

A: You can't really say that.

Q: But you've just said it! If I put £100 into my account the bank is liable to have to pay it back, so it's Liabilities. But they go and lend it to someone else and he is liable to have to pay it back, so it's Assets. It's the same £100 isn't it?

A: Yes, but...

Q: Then it cancels out. It means, doesn't it, that banks haven't really any money at all?

A: Theoretically...

Q: Never mind theoretically! And if they haven't any money, where do they get their Reserves of £249,000,000,000 or thereabouts??

A: I told you. That is the money they have made.

Q: How?

A: Well, when they lend your £100 to someone they charge him interest.

Q: How much?

A: It depends on the Bank Rate. Say five and a-half percent. That's their profit.

Q: Why isn't it my profit? Isn't it my money?

A: It's the theory of banking practice that...

Q: When I lend them my £100 why don't I charge them interest?

A: You do.

Q: You don't say. How much?

A: It depends on the Bank Rate. Say a half percent.

Q: Grasping of me, rather?

A: But that's only if you're not going to draw the money out again.

Q: But of course I'm going to draw the money out again! If I hadn't wanted to draw it out again I could have buried it in the garden!

A: They wouldn't like you to draw it out again.

Q: Why not? If I keep it there you say it's a Liability. Wouldn't they be glad if I reduced their Liabilities by removing it?

A: No. Because if you remove it they can't lend it to anyone else.

Q: But if I wanted to remove it they'd have to let me?

A: Certainly.

Q: But suppose they've already lent it to another customer?

A: Then they'll let you have some other customers money.

Q: But suppose he wants his too....and they've already let me have it?

A: You're being purposely obtuse.

Q: I think I'm being acute. What if everyone wanted their money all at once?

A: It's the theory of banking practice that they never would.

Q: So what banks bank on, is not having to meet their commitments?

A. YOU GOT IT!
observer
Regular Contributor
Regular Contributor
 
Posts: 1663
Joined: Mon Sep 18, 2006 10:21 am

Re: How the banking sector was destroyed

Postby Milo » Tue Oct 01, 2013 7:39 am

(Reuters) - A court in Cyprus issued an arrest warrant on Friday against a former central bank governor after he did not appear at a hearing in a lawsuit brought by an investor hit by the island's economic crisis.

A judge in the coastal town of Limassol issued the warrant not on the merits of the case, but after ex-banker Athanasios Orphanides did not show at the hearing scheduled for Friday, according to Cyprus' state news agency.

The plaintiff in the case held bonds in the now-defunct Laiki Bank and claims he was defrauded of 400,000 euros by Laiki executives, and by extension the regulator, the central bank, the agency said.

Orphanides headed Cyprus's central bank from 2007 to 2012, when his contract expired, and now teaches global economics at the Massachusetts Institute of Technology in Boston. He did not immediately respond to a request for comment.

The lawyer for the plaintiff also could not immediately be reached for comment.

The next hearing in the case is scheduled for Nov. 14.

Laiki Bank, once Cyprus's second-largest lender but crippled by its exposure to Greece in the group financial crisis, was wound down under terms of a 10-billion-euro international bailout in March.

Thousands of people with deposits exceeding the insurable limit of 100,000 euros lost their savings. (Reporting by Michele Kambas; Editing by Sonya Hepinstall)

http://www.reuters.com/article/2013/09/ ... O520130927
User avatar
Milo
Contributor
Contributor
 
Posts: 529
Joined: Mon May 26, 2008 8:38 am

Re: How the banking sector was destroyed

Postby supporttheunderdog » Sun Oct 13, 2013 7:39 pm

Turns out the problems with the Cyprus *anking sector may be the tip of a very large iceberg...
http://cyprus-mail.com/2013/10/13/europe-prepares-to-come-clean-on-hidden-bank-losses/

Spanish banks may be short of hundreds of Billions...the Euro ain't out the woods yet.
User avatar
supporttheunderdog
Main Contributor
Main Contributor
 
Posts: 8180
Joined: Thu Oct 28, 2010 3:03 pm
Location: limassol

Next

Return to Cyprus and the European Union

Who is online

Users browsing this forum: No registered users and 0 guests