One of the architects of Plan B, former Governor of the Central Bank of Cyprus, Panicos Demetriades, admits in his March 2016 article, “Political economy of a euro area banking crisis,” that the objective of bailing in only deposits over €100,000 was specifically to “impose losses on foreign investors . . .” He also proudly reports as the “more positive side” of the bail-in that “70% of the value of deposits affected concerned foreign residents,” like Greek nationals, “thus, leaving the Cypriot households and businesses unaffected . . .,” in his May 9, 2013 Presentation of the CBC Annual Report for 2012.
In this CBC document, the Central Bank Governor Demetriades acknowledges that it is Cyprus’ responsibility to provide deposit protection, or carry the burden when that deposit protection scheme fails. It also shows that Cyprus transferred that burden to you to avoid its own “obligation for the Republic of Cyprus to repay the €6,4 billion of insured deposits in Laiki Bank.”
An email from the Law Office of the Republic of Cyprus to the IMF explaining, after the rejection of Plan A on March 19, 2013, that applying a haircut under Plan B “to non-residents” (e.g., Greek nationals) would be “legally problematic in a number of ways" and that “it seems highly likely” that it violates Cyprus’ Bilateral Investment Treaties, which require that an expropriatory measure like Plan B be accompanied by “immediate effective and ample compensation.”
In this letter to the Cyprus Bar Association, the Central Bank of Cyprus itself admits that any haircut is unconstitutional and that any attempt to deny that it violates human rights “cannot merit serious consideration.”
In this official Position Paper of the Cypriot Government, the Ministry of Finance concedes that “it is not fair” that Laiki and Bank of Cyprus bondholders “should now suffer a haircut because of the wrong decisions” of the Cypriot Government itself, and offers to compensate bondholders by buying up their bonds for €1.9 billion and exchange them for government bonds repayable in 2018. It also opines that it will likely lose any resulting lawsuits against it anyway.
Excerpts from the Pikis Commission Report dated September 28, 2013, show that Central Bank Governor Demetriades admitted that “the Bank of Cyprus was not in need of support” and that until the sale of its Greek operations to Piraeus Bank on March 26, 2013 (and, therefore, also when Demetriades and the Minister of Finance placed Bank of Cyprus in resolution on March 25, 2013), the Bank of Cyprus was actually solvent.
This document shows Cyprus already intended to place Laiki and the Bank of Cyprus in resolution on March 18, 2013, a day before Plan A (which was designed to save both banks) was even introduced to (let alone rejected by) Parliament on March 19, 2013, because “[t]he passing of resolution legislation as part of Plan B may provide an opportunity to facilitate the Greek disposal.”
Central Bank Governor Demetriades admits in his recent book that he and President Anastasiades knew that the healthy Bank of Cyprus would also be put in resolution but deliberately did not tell Parliament when it was asked to urgently adopt the Resolution Law giving the Central Bank resolution powers.
This ECB analysis shows that converting Laiki’s and Bank of Cyprus’ Greek branches into subsidiaries would sufficiently mitigate the contagion risk resulting from a possible resolution of the banks. But the problem was that conversion would first have to be approved by the Bank of Greece.
This document reveals that Central Bank Governor Demetriades had not only discussed converting Laiki’s and Bank of Cyprus’ Greek branches into subsidiaries with his Greek colleague in 2012, but also obtained his permission as early as June 2012 – clearly demonstrating that the so-called “fire-sale” of the Greek operations in March 2013 at a €3.4 billion loss had long been prepared and was no emergency measure at all.