Bank of Cyprus is looking into swapping part of its loan book with a Greek bank operating on the island as part of moves to strengthen its capital base, it said in a stock exchange filing on Monday.
Cypriot banks operating in Greece have been battered by the country's debt crisis and deep recession which have caused losses in the sovereign debt restructuring and a rise in non-performing loans and as a result Cyprus sought emergency financial aid from its EU partners on June 25.
The Bank of Cyprus filing came in response to a report in Sunday's Kathimerini that it is in talks with Greek lender Alpha Bank on swapping part of its loan book with Alpha's loans in Cyprus.
"In the context of planning to strengthen its capital position and shield its balance sheet, the bank is looking into a number of options. One such option is exchanging ... assets and liabilities with one of the Greek banks active in Cyprus," the Bank of Cyprus said in the filing.
"At this stage there is nothing specific to announce," it said, without naming any Greek bank.
Alpha Bank, which declined to comment, is one of Greece's three largest lenders which have offered to buy Credit Agricole's struggling Greek unit Emporiki Bank, put up for sale by the French lender to limit its exposure to Greece.
The newspaper report said Alpha Bank's impaired loans in Cyprus were smaller than the Bank of Cyprus's non-performing credit in Greece and that the difference would be made up in some form including shares.
Greece's economy is expected to stay in recession for a fifth straight year in 2012, with gross domestic product seen contracting by more than 7%.
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