Mario Draghi, as a regulator, what have have you done to our banks in Cyprus?

I quote from an interview with Mr Athanasios Orphanides, ex Governor of the Central Bank of Cyprus, conducted on 19 April 2011by Michele Kambas and Sakari Suonimen of Reuters, and which appears on the web of Bank of International Settlements. 

“Q. Cypriot banks hold a sizeable quantity of Greek debt. How damaging or potentially damaging could that exposure be? Could the Central Bank have taken any steps to limit banks exposure to a single borrower? 

A. With respect to the exposure of Cypriot banks to Greek debt, we have examined the situation and we have come to the conclusion that even though there is exposure in our banking system, that exposure is manageable because our banks are very well capitalized. 

So even in the highly unlikely situation, if you wanted to run the counter factual, for example, of imposing losses on the holdings of Greek debt, our banks would manage to weather that. To understand how well capitalised our banking system is, a comparison may be useful. Our banks already meet the stricter capital requirements that are being phased in under Basel III. By contrast, in some other member states in the euro area there have been explicit calculations about how much additional capital would need to be infused into banking systems in order to meet those requirements. This is testament to the very strong capital position of our banking system. 

Regarding steps to limit exposure by any of our banks to any sovereign holdings in the euro area, as part of the supervisory process of the Central Bank of Cyprus we demand that all of our banks have good risk management systems in place. Of course, we do not control the specific decisions on portfolio holdings of banks. Whenever we determine that there is undue concentration of risks then we demand that additional capital be held in order to account for these risks. This way we manage risks to the system.” 

Which all leads me to questions that, if a Cypriot, I would make to bank regulators, for instance to Mario Draghi who for many years was the Chairman of the Financial Stability Board. 

Sir, what on earth were you thinking of when, with Basel II, you allowed our banks from little Cyprus, to lend to Greece against holding only 1.6 percent in capital, meaning authorizing them to leverage 62.5 to 1? 

Sir, and why the current problems, when we read that in April 2011, our banks “already meet the stricter capital requirements that are being phased in under Basel III?”

Come on...What have you done to our banks Mario?