Cypriot financial regulators have fined Bank of Cyprus BOC.CY and six of its former executives for failing to give shareholders information on the lender’s Greek government bond holdings, which almost bankrupted it.
Large depositors were forced to recapitalize the bank this year after it reported massive losses on its Greek bonds. The process, known as a «bail-in» was conditional to the east Mediterranean island reaching agreement with international lenders in March for 10 billion euros ($13.6 billion) in aid.
Cyprus’s Securities and Exchange Commission (SEC) said Bank of Cyprus’s former management failed to provide shareholders with timely information on their purchases of Greek government bonds dating back to 2010.
Investors, the regulator said, were left with the impression that the Cypriot bank had disposed of most of its Greek government bond holdings after public comments to that effect by its chief executive in December 2009.
But in the months that followed, Bank of Cyprus accumulated Greek bonds worth up to 2.4 billion euros, almost matching the lender’s equity capital of 2.5 billion euros, the SEC said.
The «least investors could have expected» was disclosure from the bank about its holdings, taking into account they were considered non-investment grade by ratings agency Standard and Poor’s, it said.
Bank of Cyprus lost 1.9 billion euros on its Greek bond holdings, largely through an EU-approved restructuring of Greek sovereign paper to make that country’s debt burden more manageable.
Combined with losses of its then-peer Laiki Bank, exposure to Greece was instrumental in triggering a financial crisis in Cyprus and forcing the island to seek international aid from the European Union and International Monetary Fund. Laiki was shut down in the bailout.
The SEC said it had fined Bank of Cyprus 160,000 euros; former CEO Andreas Eliades 140,000 euros; former deputy and compliance officer Yiannis Kypri 120,000 euros; and four members of its Asset Liability Committee 10,000 euros each.