THE BANK of Cyprus (BoC) has found itself in hot water with the Central Bank over the writing off of bad debts to the tune of £148 million, as the supervisory body considered the figure a little too generous.
According to yesterday’s Phileleftheros, the majority of the loans were given during the infamous stock exchange bubble of 1999 and 2000 to clients of the bank, and in many cases, without acquiring real security on the loans.
The BoC decided on the sizeable write off in March this year, but without first securing the approval of the Central Bank, said the report. Before approving such an action, the supervisory body wants to know what legal measures the commercial bank has taken to extract the loan money, the timing of every loan, and the real security requested from each client before approving the bad debt.
According to Phileleftheros, the BoC had told the Central Bank that the decision to categorise £148m in loans as bad debt was not definitive but taken for a clearer presentation of the balance sheet.
Central Bank Governor Christodoulos Christodoulou sent a letter to the BoC Chairman Vasilis Rologis clearly setting his position on the matter.
Christodoulou reportedly wrote that it was not acceptable either in legal or accounting terms to write off bad debt before exhausting all legal means at the disposal of the bank against the debtors.
The governor went a step further reminding Rologis of his obligation to find who was responsible for giving out the huge amount of bad loans. The paper quotes Christodoulou telling the BoC Chairman succinctly: “Your legal obligation for the sensible management of money entrusted to you by shareholders and savers is self-evident.”
The BoC Group yesterday released a statement in reaction to the article, in which the banking giant failed to refute the substance of the report.
Instead, the bank announced that the writing off of bad debt was a matter of presenting accounts in a more rational manner, something adopted by all banks abroad, it said.
“Independent of the accounting practice, it goes without saying that the Bank of Cyprus has not abandoned its legal rights,” said the BoC, implying that it could still go after the big debtors in the future.
The BoC announcement said the group agreed with the conclusions of the Central Bank and would continue using every means available to recover the loans, while co-operating fully with the supervisory authority.
