Commerzbank slapped with fine for deals with defunct Cypriot bank

The Frankfurt headquarters of Germany’s Commerzbank, which has been fined for its role in investment operations carried out by the Cypriot bank Laiki. (AFP)
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Updated 05 July 2020

Commerzbank slapped with fine for deals with defunct Cypriot bank

  • Laiki, once Cyprus’s second-largest bank, was taken into administration and wound down in March 2013

FRANKFURT: Cyprus’s securities regulator has imposed a €650,000 ($730,800) fine on Germany’s Commerzbank for its role in transactions carried out by a local bank that collapsed during the country’s 2013 financial crisis.

The country’s CySEC commission said Commerzbank had been sanctioned over investment operations conducted by the now-defunct Laiki — also known as Cyprus Popular Bank — in 2011, following Laiki’s merger with Greece’s Marfin-Egnatia Bank.

Commerzbank declined to comment on the case, which followed an eight-year probe by Cypriot authorities.

The investigation, which was launched following calls by left-wing AKEL lawmaker Irene Charalambides, looked into whether the Cypriot deals may have broken laws prohibiting a company from buying its own stock.

CySEC said Laiki invested in two structured products issued by Commerzbank in 2008. Marfin-Egnatia, which was at that time a Laiki subsidiary, was an index sponsor responsible for the composition of the portfolio.

As a result of the 2011 merger between Laiki and Marfin-Egnatia, Laiki became the index sponsor, creating a conflict of interest, CySEC said.

It said Laiki and Commerzbank acted in “concert” to manipulate the market in relation to Laiki shares on several occasions in April and May 2011.

CySEC said it had not fined Laiki because it is in administration and did not want to put an additional burden on former depositors, bond holders and shareholders.

Laiki, once Cyprus’s second-largest bank, was taken into administration and wound down under terms of a €10 billion international financial assistance package to Cyprus in March 2013.

Some €4.3 billion in uninsured deposits exceeding the EU threshold of 100,000 were wiped out, and thousands of people lost their life savings.

Charalambides said she felt vindicated by the result of the investigation.

“The resolution authority should consider the possibility of civil lawsuits against Commerzbank to ensure that the funds channelled to these structured bonds, with the objective of manipulating shares, be returned, and given to depositors whose funds were subjected to a haircut,” she said in a statement.


Oman’s bond market return a key test for reform path

Updated 21 October 2020

Oman’s bond market return a key test for reform path

  • After becoming ruler in January, Sultan Haitham made shaking up and modernising state finances a top priority

DUBAI: Oman’s return to the international bond market this week will be a test of its ability to convince investors that long-awaited fiscal reforms have started to put it on a sustainable financial footing.

Oman, rated below investment grade by all the major credit agencies, announced on Monday plans to issue bonds with maturities of three, seven and 12 years, in what would be its first global debt sale this year.

Sultan Haitham, who became Oman’s ruler in January, has made shaking up state finances one of his priorities.

But investors would like to see more concrete steps being taken and, after a further sovereign downgrade last week, may require the new bonds to offer a significant premium over the country’s existing debt.

“The new sultan has done some good things — rationalizing the number of ministries, the implementation of VAT, plans to generate additional tax revenues, and they still have sovereign assets,” said Raza Agha, head of emerging markets credit strategy at Legal & General Investment Management.

“There is positive momentum but it will take time for that credibility to build.”

According to a bond prospectus, Oman has begun talks with some Gulf countries for financial support.

“I don’t think this will actually be taken into consideration by investors unless there is a tangible announcement from Gulf countries with a tangible support package,” said Zeina Rizk, executive fixed income director at Arqaam Capital.

Oman will likely price the new three-year bonds in the high 4 percent area, the seven-year tranche in the high 6 percent and the 12-year in the mid-to-high 7 percent area, implying a premium of at least 50 basis points (bps) over its existing curve, she said.

Two other investors, who did not wish to be named, said the paper could carry a 25 bps premium over existing secondary trading levels.

Sources have previously told Reuters Oman would target over $3 billion with the new deal.

“If they take $3 to 3.5 billion, you will have a market indigestion for Oman, and I’m sure people will ask to be compensated for this risk,” Rizk said.