Cyprus CB governor fails to regulate banking system - letter

PanARMENIAN.Net - The governor of Cyprus's central bank failed to regulate its now-crippled banking system effectively, the island's president Nicos Anastasiades said in a letter to ECB chief Mario Draghi, according to Reuters.

Deepening a row between the government and central bank, Anastasiades attacked Panicos Demetriades, who was appointed as governor last year, for what he said was sustaining an insolvent bank using a European Central Bank cash lifeline.

The president also said there were damaging delays in resolving problems in the banking sector, after depositors were slapped with massive losses to fund a state bailout last month.

In an April 15 letter to ECB President Draghi, Anastasiades speaks of "shortcomings of the Central Bank of Cyprus".

He was responding to a letter from Draghi last week in which the ECB president warned that any attempt to effectively sack Demetriades could land Cyprus in the European Court of Justice.

In the six-page letter, Anastasiades intimates that Demetriades, an academic economist appointed by the communist-led administration that lost power two months ago, was not fully independent of that government.

The recent resignations of three directors from the central bank's board "indicate that Governor Demetriades does not even enjoy the trust and the confidence of the Institution he is running," Anastasiades wrote in the letter.

Demetriades, who is under growing pressure to resign over his handling of the crisis, said he was willing to work with the government to pull the island out of its economic morass, provided the central bank's independence was respected.

Under European Union law, a governor can only be dismissed if he no longer fulfils the conditions required for the performance of his duties, or if he is guilty of serious misconduct.