NICOSIA (Reuters) - Consultants involved in restructuring Cyprus's stricken banking sector - involving depositors footing the recapitalisation bill - have told the island's central bank they will not press for a success fee of almost 5 million euros (4.2 million pounds).
The Cypriot central bank has been at the centre of a storm this week after media disclosures of a March agreement between its governor, Panicos Demetriades, and consultants Alvarez and Marsal.
The consultants had sought a percentage of the amount raised from the recapitalisation of Cypriot banks. That recapitalisation had enraged many ordinary Cypriots, who were forced to forfeit savings in the affected banks
Documents compiled by the Cypriot central bank legal advisor, previously leaked to Cypriot media, said the consultants were seeking 4.75 million euros from Cypriot authorities, over and above their standard fee. Alvarez and Marsal had declined to comment to Reuters on the disclosures on Wednesday.
"Alvarez & Marsal, in a letter sent to the Cyprus Central Bank today, states 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," a statement from the Cypriot central bank said on Thursday.
Cyprus was forced to wind down a major bank and impose heavy losses on depositors in a second in March 2013 to qualify for 10 billion euros in aid from international lenders, unprecedented in the history of the euro zone.
Thousands of people lost their savings in Laiki Bank, wound down under terms of the agreement. Major depositors with funds exceeding 100,000 euros in Bank of Cyprus were forced to forfeit 47.5 percent of their savings exceeding the euro zone insurable limit of 100,000 euros to recapitalise that bank.
Members of the board of the Cypriot central bank had previously said they were not fully aware of the clause by which the consultants could demand payment over and above their normal fees tied to the bailout.
The documents had stated consultants could seek 0.10 percent of "the total gross capital benefit" into the banking system.
In the wake of the disclosures on Wednesday, the Cypriot central bank said its legal counsel had advised the bank had no obligation to pay a success fee.
The disclosure added to pressure on Demetriades, an ECB governing board member. Last week, Cyprus's president said he was speaking to legal advisers on the prospect of getting Demetriades removed on competency grounds.(Reporting By Michele Kambas)