In a recent development, five Russian and Belarusian depositors of the former Laiki Bank have been vindicated with a new ruling from the Limassol District Court, awarding them compensations amounting to €5.4 million.
This is the second ruling in favor of depositors.
The new verdict was issued by the same court that ruled in favor of another depositor on November 8, using the same reasoning that they “suffered damage to their property and, therefore, are entitled to compensation” for the losses incurred due to the haircut of deposits in Laiki Bank in 2013, under the “Restructuring of Credit and Other Institutions Law of 2013.”
With this decision, the Central Bank and the Republic of Cyprus were found guilty, while the former Popular Bank was acquitted.
According to the verdict, the Central Bank of Cyprus allowed the banking sector to expand without control or protection of depositors’ interests.
It failed to take measures to address the liquidity shortage, which, in the case of the Laiki Bank, had been identified by the CBC itself since 2010.
Furthermore, the CBC, despite disagreements with the government and despite warnings from experts, passively aligned with the government’s choices, ignoring the signs of an impending financial crisis.
The court ruling highlighted the negligence of the CBC, particularly in not evaluating the developments that led to the Cyprus Republic’s exclusion from international markets in May 2011 and the subsequent explosion in Mari in July 2011, causing approximately €2.3 billion in damages.
The decision also pointed out the CBC’s failure to assess the government’s omissions in seeking external financial assistance promptly.
“The CBC was aware of the risks and accepted them, disregarding the outcome, which was the failure to secure depositors’ interests. Neglecting to take effective measures against Laiki Bank’s issues went beyond the usual negligence for an economic matter, which could have been addressed when there was a duty, a positive obligation, to intervene and address foreseeable and existing risks,” the ruling stated.
Finally, the court found that the haircut of deposits was due to the careless acts of the Cyprus Republic and the serious negligence of the CBC, rather than reasons related to market rules.
The plaintiffs were represented by the law firm of Andreas Theophilos.
