Two of the most senior executives at Bank of Cyprus may have deleted crucial e-mail documents last year related to what proved to be a disastrous decision to invest heavily in Greek government bonds just before Greece?s international bailout in 2010, according to an investigative report commissioned by the central bank of Cyprus.
The report said forensic experts found that the computer belonging to the bank?s former chief executive, Andreas Eliades, who was forced to resign last summer, had ?wiping software loaded which is not part of the standard software installations? at the Bank of Cyprus.
Investigators also found such software on the computer of Christakis Patsalides, a senior executive in the bank?s treasury department who, according to the report?s findings, was a driving force behind the decision to buy the Greek government bonds. Patsalides has also left the bank.
Efforts to reach Eliades and Patsalides late Thursday were not immediately successful. The report said Eliades did not ?participate or assist? in the investigation, despite being urged to do so by the bank and its outside lawyers.
The Bank of Cyprus, long considered the better run of the two large banks that have been at the centre of the Cypriot bailout debacle, decided to speculate in high-yielding Greek bonds by accumulating a 2.4-billion-euro position from late December 2009 until June 2010, just as the Greece government was running out of money.
That decision resulted in a loss of 1.9 billion euros, or about $2.4 billion, when bond investors were eventually forced to take a 75% haircut under the final terms of the Greek bailout, worked out last year.
That loss and a larger one at the other big Cypriot bank, Laiki Bank, on a similarly misguided investment foray, totalled 4.5 billion euros. That was more than Cyprus, with a gross domestic product of 18 billion euros, was able to sustain. And the losses resulted in a near-collapse of the Cypriot banking sector, leading the country?s government to seek a 10-billion-euro bailout from the troika of international lenders: the IMF, the European Commission and the European Central Bank.
Under terms of the bailout, the Bank of Cyprus?s biggest depositors will be forced to take losses of as much as 60% to help absorb the cost of cleaning up Cyprus?s financial mess.
The issue of how the banks became laden with Greek government bonds has become an explosive one in Cyprus as politicians and regulators try to explain to furious taxpayers why the country has been forced to impose harsh measures on bank clients of all sizes, including restrictions on fund transfers and withdrawals.
A committee of judges has already been appointed by the government to get to the bottom of the matter.
The report that surfaced on Thursday was commissioned by the Cypriot central bank last August, well before the country?s bailout was made final. The central bank hired Alvarez & Marsal, a financial consulting firm, to investigate how and why the Bank of Cyprus had come to make such a high-risk gamble. Investigators say that from August 12, 2012, the central bank had ordered that all electronic data at the banks be preserved.
The report did not say when the file-wiping software on Eliades?s and Patsalides?s computers was installed.
But investigators did suggest digital documents could have been erased during the many delays that followed Alvarez?s requests for documents. ?Mass deletion of data appears to have been undertaken on the Patsalides computer on 18 October 2012,? the report said.