Cypriot President Threatens Court Move To Sack Central Bank Chief

by
Reuters
Cyprus's president is contemplating recourse to the island's highest court to sack the governor of the central bank, heightening tensions simmering between the two for months.

Cyprus's president is contemplating recourse to the island's highest court to sack the governor of the central bank, heightening tensions simmering between the two for months.

In a television interview broadcast late on Wednesday, Nicos Anastasiades accused Central Bank of Cyprus Governor Panicos Demetriades of not being up to the job and of dragging his feet on restructuring the island's battered banking system.

Demetriades, a member of the Governing Council of the European Central Bank, has faced fierce criticism over the way he handled a harsh bailout imposed on the Mediterranean island by international lenders. Cyprus had to close a major bank and seize savings in a second in return for 10 billion euros in aid.

"I am documenting all those things which represent weakness or inadequacy in the performance of his duties and, in accordance with the constitution, I will decide the prospect of referral to the highest legal council," Anastasiades told local channel Mega.

Demetriades's office said the remarks were a clear attempt to undermine the independence of the central bank.

It is not the first time disputes between the two have been aired in public, but Anastasiades has not been as forthright before in his criticism.

Earlier in the year ECB President Mario Draghi warned Cyprus against any attempt to sack Demetriades, triggering a sharp response from Anastasiades that the banker had failed as a regulator..

He was appointed for a five-year term in May 2012, under the previous communist administration. By law, only a recourse to the Supreme Court on the grounds of being unfit for the job or serious misconduct could get him fired.

One of the main criticisms directed against him has been how, under his watch, one of the afflicted banks accumulated billions in emergency liquidity aid, only to buckle and fail when the ECB threatened to pull assistance.

Anastasiades appeared particularly angry with Central Bank delays in completing the assessment of board directors in revamped Bank of Cyprus under the "fit and proper" rules.

"I have shown exceptional tolerance," Anastasiades said.

A new board of 16 directors, including six wealthy Russians whose deposits were forcibly converted to equity to recapitalise the bank, were elected on Sept. 10.

The central bank is still assessing the qualifications of some of them.

"This is a very important regulatory authority of the Central Bank. It is a careful assessment based on rules of the European Banking Authority to protect Bank of Cyprus and avoid mistakes of the past," the central bank said.

Cyprus's international lenders said on Wednesday it has made progress with overhauling its banking sector and pushing through structural reforms, but warned of significant risks ahead.