(MENAFN - AFP) Cyprus ordered a criminal probe Thursday into a contract under which the central bank allegedly agreed to pay a consulting firm nearly 5 million euros for money used to recapitalise the country's banks.
Deputy Attorney General Rikkos Erotokritou said it would focus on ''the leak of confidential documents from the central bank... possible forgery of documents and the possible deception of central bank board members."
The contract was signed in March with London-based consultants Alvarez and Marsal (A&M), who were hired to help the floundering banking sector to recapitalise.
At the time, Cyprus had clinched a 10 billion euro (13.8 billion ) EU-IMF bailout under which the island's second-largest lender, Laiki, was wound up and its good assets folded into the largest lender, Bank of Cyprus.
In the process, BoC needed to be recapitalised, and customers with deposits of more than 100,000 euros at Bank of Cyprus saw 47.5 percent of that amount turned into shares.
The press reported this week that the central bank had agreed to a demand by A&M that it pay a success fee of 0.10 percent of the total capital injected into the banking system, however it was achieved.
But on Wednesday, the central bank issued a statement saying "no success fee payment is justified," on the grounds that recapitalisation came from a bail-in not outside investment.
A&W are reportedly asking for 4.75 million euros (6.6 million), well under the 11 million euros to which they would be entitled on the basis of the 0.10 percent figure, with payment due on October 31.
Unnamed central bank board members have told media they had no idea about a "success fee" clause.
In a brief statement Thursday, the central bank said it had received a letter from A&M stating that, "at the time of the agreement there was never any intention of requesting compensation from the bail-in and this continues to be the firm's position."
Central bank Governor Panicos Demetriades, whom President Nicos Anastasiades is trying to oust for failure to get a handle on the economy, has said confidential documents had been leaked and urged the attorney general to intervene.
Demetriades also struck back at his critics saying media reports ''were part of an orchestrated effort by certain groups to compel the governor to resign or to promote the interests of Alvarez and Marsal.''
The deputy attorney general did not mention A&M but said the issue was of ''great significance'' and the decision came after three days of ''announcements and arguments."
Parliament, whose ethics committee has demanded to see a copy of the contract, is expected to take up the matter next wee