Uninsured creditors of liquidated Laiki Bank to get back 6 pct deposits

Source: Xinhua| 2019-08-13 21:43:47|Editor: Shi Yinglun
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NICOSIA, Aug. 13 (Xinhua) -- Uninsured depositors of the wound down Cyprus Popular Bank, commonly known as Laiki, is likely to get back 6 cents for every euro they lost in the 2013 bail-in of the lender, its special administrator said on Tuesday.

KLeovoulos Alexandrou, who presided over the liquidation of the bank, wound down as part of Cyprus's bailout at the peak of the meltdown in 2013, said that he was able to raise approximately 220 million euros (247 million U.S. dollars) from the sale of Laiki's assets.

An additional 32 million euros could be expected from the sale of Laiki's remaining stake of 4.8 per cent in Bank of Cyprus Holdings, Alexandrou told local financial news outlet Stockwatch.

Six years after the closing down of the bank, the total amount collected from its assets comes to about 6 percent of the 4 billion euros of uninsured deposits which were lost when the lender was wound down and folded into Bank of Cyprus.

That means that Laiki's uninsured depositors will lose almost 90 percent of their deposits, compared with the loss of 47.5 percent of uninsured deposits in Bank of Cyprus, which was used to recapitalize the lender in the world's first bail-in, on the instructions of the Eurogroup and the International Monetary Fund.

Insured savings were untouched and transferred to Bank of Cyprus.

Besides of the sale of stake in Bank of Cyprus, assets which fetched money for Laiki's creditors came from investments in subsidiary companies in Greece, Malta, Romania, Serbia, Ukraine and Russia.

Last week, the sale of Laiki's three subsidiaries in Greece to a Greek Investment company was completed for a reported 73.5 million euros.

Laiki's winding down was one of the most tragic aspects of the 2013 crisis, as depositors lost almost all their money. Some of them were pensioners who used their retirement bonus to buy what bank officials told them were high yield bonds.

In fact, small letter provisions in the bond purchase agreements gave the right to the bank to turn the bonds into worthless shares, as Laiki was at the time an insolvent lender.

By the time Laiki was put under liquidation, it had amassed about 9 billion euros in Emergency Liquidity Assistance (ELA) from the European Central Bank.

As a way of comparison, ELA drawn by Laiki amounted to 50 per cent of Cyprus's annual economy, which at the time amounted to about 18 billion euros.

Laiki was nationalized in May, 2012, after the government pumped 1.8 billion to recapitalize it, a move which proved futile.

Panicos Demetriades, who had been the governor of Central Bank of Cyprus from May 3, 2010 until April 10, 2014, told an inquiry panel probing into the causes of the 2013 crisis that the then president of the state had instructed him to keep Laiki alive by allowing it to draw ELA, so as not to prejudice his chances of being re-elected in the 2013 presidential election.

Laiki's debt in ELA was transferred to Bank of Cyprus, which took on most of Laiki's operations.

Bank of Cyprus repaid the remaining part of Laiki's ELA debt in 2017.