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FBME Bank said on Sunday that the Central Bank of Cyprus (CBC) had triggered the deposit guarantee scheme so that the supervisory body could claim to have fulfilled its duties to depositors “and evade further exposure for misconduct”.

The CBC announced on Saturday that after taking note of its own findings, FBME Bank Ltd-Cyprus Branch did not appear at present able to return deposits to customers for reasons directly related to its financial situation “and believes that it will not be able to do so in the near future, has proceeded to the activation of the Deposit Guarantee Fund for Banks and will pay compensation to the beneficiaries of FBME BANK Ltd-Cyprus Branch”.

But FBME said the activation of the scheme was designed to protect the CBC, not depositors

Following “a series of unilateral, illegal, arbitrary and irresponsible actions” by the CBC, the announcement, the bank said, came 21 months after the Resolution Authority and the CBC acted against FBME and at the end of “a protracted period where the Special Administrator choked depositor access to funds on the instruction of the CBC for the expressly stated purpose of maintaining sufficient funds in the bank to repay the Deposit Protection Scheme”

“The funds that CBC rely on have been in their possession for more than a year and the circumstances that would have permitted depositors to access the Deposit Protection Scheme have existed for a considerable time,” FBME said. “It is incorrectly stated that the economic condition of FBME is the reason for activation. The truth is that funds are available but the CBC’s mishandling of the situation has starved depositors of access to funds.”

The Special Administrator of the Cyprus branch of FBME who was appointed by CBC in January, on March 31 delivered signed redundancy notices to 136 FBME staff in Cyprus, covering the major part of the remaining employee base of the bank on the island. The bank says this is being challenged in court, as is its liquidation.

The move to dismiss staff followed a ruling on March 25, by FinCEN, a unit of the US treasury, reaffirming its July 2014 decision to prohibit US banks from opening or maintaining correspondent accounts of or on behalf of FBME, a Tanzanian lender, which it described as a financial institution “of primary money laundering concern”.

FBME in its statement on Sunday questioned whether depositors had been treated equally and correctly by the regulatory authorities in Cyprus. “Is the position of depositors better now than it would be if correct measures had been taken from 21 July 2014?” it said.
“Any observer of CBC actions over the past year will notice three consistent traits: lack of transparency, lack of responsibility, and lack of technical competence,” the bank said.

“The answer to the depositors’ questions is that they have not been treated equally; the Deposit Protection Scheme is being triggered so that CBC can claim to have fulfilled its duties to depositors and evade further exposure for misconduct; and the intervention of the CBC and the Resolution Authority has had a negative impact on depositors. The consistent lack of competence of CBC needs no further comment,” it added.

It said depositors would already have noted that CBC and the Resolution Authority were liable in law to them at this point in time. “By taking action now, CBC seeks to create a fait accompli situation rendering moot any decision of the courts in the upcoming liquidation action and designed to obscure and evade their liability to all relevant parties that arises from the action over the past year and a half. Depositor protection has clearly not been the priority for CBC at any point,” the bank said.

According to the CBC announcement, the maximum compensation amount for each depositor will be €100,000, and the amount will be decided by the committee, depending on each person’s deposits but also on their obligations toward FBME bank.

The committee will accept applications for compensation as of Monday.

For more information, depositors of FBME BANK Ltd-Cyprus Branch may call 22 714100, 22 714570, 22 714572 as of Monday. Office hours 11am until 1pm and from 3.30 pm to 5pm.