Central bank governor issues warning to detractors
THIS IS not the time to be questioning my authority to supervise the banking system, warned Central Bank (CB) Governor Athanasios Orphanides yesterday.
Orphanides yesterday revealed that he is seeking legal advice following queries over his decision-making authority. The governor warned that it was “extremely dangerous and harmful” for the governing body’s processes to be brought into question now, given the dire crisis facing the financial world.
“I have observed with great regret that in recent days the legal framework for decision-making on supervisory issues, like issuing licences to banks or demands for increased stakes in the shareholding of banks, is being brought into doubt,” said Orphanides.
The governor expressed concern that the debate on the extent of his powers was being made public through the media.
He said it such discussions were “extremely dangerous and harmful … calling into question in our country the decision-making framework for the banking sector, especially in public”.
“In order to eliminate any doubts about the legal framework which has so unluckily been raised at this time,” Orphanides has requested legal advice from the Legal Service and the CB’s independent legal adviser.
The public debate the governor mentioned refers to the request by Marfin Investment Group (MIG) to up its stake in Marfin Popular Bank (MPB) to 30 per cent. According to one banking source, Orphanides had indicated to MIG that he would not approve such a move and that they should best withdraw the request.
The same source said the governor was concerned that by acquiring such a huge stake would take the second largest bank in Cyprus out of the realms of his supervisory authority, and open the door for collaboration between MIG and other investors for effective control of MPB.
Orphanides said MIG announced the reasons for its withdrawal last month, noting that no mention of the Central Bank was made in its reasoning.
However, according to the same source, some members of the Central Bank’s Board of Directors were upset that the governor had allegedly taken the decision without consulting them.
These grievances found their way to the media through anonymous sources, leading Orphanides to seek legal advice as to what his powers are exactly and whether he has the right to decide alone on such matters.
The recent visit by MIG Vice-President Andreas Vgenopoulos to Cyprus and his meeting with President Demetris Christofias added some sparks to the debate.
It is believed Vgenopoulos discussed with Christofias the need to look at the existing institutional framework to allow for competition on an equal footing.
Regarding the numerous reports, Orphanides said they left an “unnecessary shadow” over the CB, adding that it was not necessary to get into the details of the issue, citing professional confidentiality.
“These reports, which refer also to discussions of the board of directors, raise the issue of the governor’s competences and doubt the interpretation of the law applied many times by my predecessors in similar incidents without ever questioning the interpretation,” he said.
The governor noted that “in no other EU country, are such decisions taken by organs similar to our governing body”, adding that the board of directors was made up of non-executive officers.
He said he was now obliged “particularly at this moment where we are in the worst macroeconomic and banking crisis we have seen since the founding of the Central Bank of Cyprus, not to bring into doubt in any way the legal framework, decision-making, supervisory framework which protected us so well in Cyprus”.
Orphanides has also asked to meet with Christofias to discuss the matter.
