A Cypriot lawmaker investigating the nation’s banking crisis of last year said she has asked German regulators to probe Commerzbank AG (CBK) over its alleged role in helping a failed local lender to purchase its own stock.
Commerzbank, based in Frankfurt, said it has found no evidence of wrongdoing in an initial internal review.
Irene Charalambides said she wrote to Germany’s financial watchdog Bafin in December, as well as the Cyprus Securities and Exchange Commission, over the purchase of structured bonds by the now-defunct Cyprus Popular Bank Pcl from Commerzbank that the Cypriot lender may have illegally used to support its own share price.
“It seems that money from depositors was channeled through the cover of so-called structured instruments for the purchase of shares of the bank and of legal entities connected with the bank’s previous management and its key shareholders,” Charalambides said by telephone yesterday.
Charalambides, a member of the Cypriot House of Representatives, is participating in a parliamentary investigation into the circumstances surrounding the collapse of Cyprus Popular, also known as Laiki Bank, and a turbulent bailout by international lenders including the euro area in March 2013 that saw bank-account holders lose part of their savings. Depositors in the country are still subject to capital controls.
Laiki was the nation’s second biggest lender until it was liquidated as part of the country’s 10 billion-euro ($13.6 billion) bailout, with uninsured depositors losing savings greater than 100,000 euros. The bank was absorbed by Bank of Cyprus Pcl, which also took on Laiki’s 9 billion-euro liability from the central bank’s Emergency Liquidity Assistance program.
Its administrators declined to comment on the lawmaker’s request to Bloomberg News today.
Charalambides said the scope of the allegations runs from 2008 to 2011, and that Bafin should assess whether Commerzbank knew about and “turned a blind eye” to the uses of structured products.
“It’s our expectation that the authorities in Cyprus and Europe act immediately to bring charges against those involved and recover invested funds amounting to some millions of euros for the benefit of the uninsured depositors of Laiki Bank,” Charalambides said.
“Based on our initial research, we have no indication of any wrongdoing by Commerzbank related to these certificates,” Margarita Thiel, a Commerzbank spokeswoman, said by e-mail today.
Bafin spokesman Ben Fischer didn’t immediately return a call seeking comment.
The Cyprus Securities and Exchange Commission has received Charalambides’s letter and is investigating the matter with the German regulator, Demetra Kalogirou, the executive chairman of the Cypriot authority, said today. “It’s just one of our many cases.”
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