Cyprus’s central bank defended its governor from “simplistic” government allegations on Monday, saying he had prevented the disorderly bankruptcy of the island’s second-largest bank and thereby of the state itself, which is now in line for a bailout.
The government has taken Central Bank of Cyprus Governor Panicos Demetriades to task for allowing Popular Bank, which is also known as Laiki, to receive emergency liquidity assistance (ELA), only to be wound down in a chaotic bailout last month.
The Cypriot central bank rejected the allegations, however.
“The simplistic and unsubstantiated allegation that the Central Bank of Cyprus governor ‘allowed’ the continuation of the provision of liquidity to Laiki bank through ELA is incorrect and is refuted,” a central bank document circulated in London said.
“On the contrary, it is clearly evident that the governor, with his timely statements and actions, prevented a disorderly bankruptcy of Laiki bank and consequently the country itself.”