Bank of Cyprus Fined for Greek Bond Buys

Bank of Cyprus and six former executives were fined by the Securities and Exchange Commission on Friday for failing to inform shareholders over the risk of its Greek bond purchases.

The island's largest lender was fined 160,000 euros ($218,000) for non-disclosure on its high-risk junk-rated Greek bond buys to the tune of 2.4 billion euros in 2010.

This compared to the bank's equity capital of 2.5 billion at the time.

The SEC said the bank had a duty to inform investors to ensure transparency while non-disclosure "deprives the investor public of information which they have a right to know."

It said that the bank's management had given the impression that it had off-loaded toxic Greek bonds when in fact it had invested heavily in them.

Ex-CEO Andreas Eliades and former executive director Yiannis Kypri received fines of 140,000 euros and 120,000 euros, respectively, for being "negligent" in their duty to protect shareholders.

Four ex-members of the bank's asset liability committee were fined 10,000 euros each.

Cypriot banks lost a total of 4.5 billion euros in the Greek bond haircut, which forced the cash-strapped government to seek EU financial aid as it could not financially rescue them.

In March, Cyprus agreed a 10 billion euro ($13.3 billion) rescue package negotiated with the European Commission, European Central Bank and International Monetary Fund to bail out its troubled economy and oversized banking system.

The deal also involved the closure of the island's second-largest bank Laiki and a large "hair cut" on deposits above 100,000 euros at the Bank of Cyprus.

Fears of a bank run forced the government to close all the island's banks for nearly two weeks in March and impose draconian controls when they reopened.

There is still a 300 euro daily cash withdrawal ceiling from banks and central bank approval is needed for large business transactions.