By Elias Hazou
Panicos Demetriades was appointed governor of the Central Bank in May 2012 for a five-year term by then President Demetris Christofias.
On March 18, 2013, after the first haircut decision – on all bank deposits – at the Eurogroup, Demetriades wanted the banks to re-open the following day, but President Nicos Anastasiades put a stop to it because allowing the banks to open would almost certainly have sparked a bank run.
A week later, Demetriades gave a repeat performance, when it was leaked that he intended for the banks – apart from Laiki and Bank of Cyprus – to open without capital controls. Anastasiades summoned him to the presidential palace and convinced him otherwise.
The Central Bank chief’s popularity fell off a cliff after he caused panic by announcing that an administrator would be appointed to run the Bank of Cyprus, omitting to mention that this did not entail winding up the bank. By the time the misunderstanding was cleared up, hundreds of incensed bank employees had converged on the Central Bank.
In late March 2013 parliament was set to vote on a motion calling on the President to sack Demetriades, but MPs ultimately backed off after warnings that the move could open up a legal can of worms.
In May Demetriades told foreign press how he moved his family off the island after receiving death threats following the country’s controversial bailout.
In September the President revealed intentions to get rid of Demetriades by referring the central banker to the Supreme Court on the grounds of incompetence. At the heart of the government’s case against Demetriades was the way he had handled the provision of emergency liquidity assistance (ELA) to Laiki Bank from the time he took over as governor in May 2012, by which time Laiki had already been issued with €3.8 billion in ELA. His decision to continue issuing assistance left the bank with an ELA debt in excess of €9 billion which was then transferred to the Bank of Cyprus when Laiki was wound down under the terms of the IMF-EU bailout in March.
In October the Attorney-general launched a criminal probe into allegations that Demetriades had agreed to pay consultants Alvarez & Marsal a 0.10 per cent fee on any amount needed to recapitalise the banks, including when cash was seized from depositors. The deal was allegedly signed after the Eurogroup decided to seize depositors’ cash to recapitalise banks. Demetriades claimed he signed the agreement under duress.
In an interview on Sigma TV in December, Demetriades said President Anastasiades was fully aware about the deposit haircut before flying out to the first Eurogroup in March. His comments were subsequently dismissed as “false and misleading” by the government spokesman.
