The Association of old BoC shareholders, including the Archbishop and myself, are right to be considering class action against the Eurogroup for dispossessing them of their shares.
Of all the participants in the Bank of Cyprus the shareholders have been the most brutally treated. At least the haircut victims are being given shares in the bank, in what is effectively a forced purchase of shares which will increase in value many times over.
The old shareholders who willingly came forward with their hundreds of millions, in the three recapitalisations prior to 2013 are the ones who saved their company from far worse capital shortages. If the major Russian shareholder had also taken up his huge options, the bank would have not needed to ask for government support – which led to the questionable overcalculation of capital needs, sidelining the bank’s elected auditors.
It is impossible to understand why one euro invested in 2010, 2011 or 2012 is worth less than the euro invested forcibly in 2013 by the depositors. The old shareholders should demand a court order for complete restitution of their shares.
The Eurogroup in 2013 coerced the Cyprus Parliament into voting through a law which reduced our shareholding by 99%. The Draft Directive on Bank Resolution recently accepted by the EU provides for shareholders to take the greatest losses of all stakeholders, but they have already suffered by losing 98% by the share market prices-in the case of BoC from €10 in 2007 down to €0.2 in 2013. Nowhere in the Draft Resolution Directive does it provide for cancellation or dispossession of shares. In any case, the Directive specifically states that it will not come into effect until January 2015 while the Bail-In Resolution Tool cannot be implemented till January 2018. Obviously this is designed to allow time for consultations between all stakeholders and government.
Although the Bank of Cyprus is currently in need of new capital, the new shares are to be sold at around €0.25 each whereas we paid the full €1 price for our shares. When in a few years mortgaged property prices have drastically risen again (they always do) the bank will write back huge provisions, benefitting the new shareholders with massive gains– whereas we old sharehoders will have lost forever our chance to benefit like the others. Is that fair?
If we are to avoid long and expensive legal action, the Cyprus Parliament has the way to restore our original shares by voting an amendment to the Resolution Law of 2013. They have the right to do this, as the bank is no longer under resolution. The benefits to 90,000 shareholders, and to business confidence will be enormous. Furthermore, billions of shares used as collateral to guarantee loans, will be returned as security thus dramatically improving BoC’s balance sheet.
Christakis Christofides cyprus-mail.com