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EBRD expected to take voting rights of former Laiki in Bank of Cyprus

11 May, 2014

Stakeholders in Cyprus expect that the issue of the management of the 18% share capital of Bank of Cyprus (BoC) owned by the former Laiki Bank, will be discussed during the forthcoming visit of the Minister of Finance in Warsaw, at the headquarters of the European Bank for Reconstruction and Development (EBRD).

The Minister of Finance Harris Georgiades will attend the Board of Governors, representing the Bank’s 66 shareholders, at its Annual Meeting in Warsaw on 14-15 May that will decide whether Cyprus should temporarily become a recipient of financing.
According to CNA sources, the Resolution Authority in Cyprus (Central Bank, Finance Ministry, Securities and Exchange Commission) which holds the administration of the percentage held by Laiki Bank in the share capital of the Bank of Cyprus, could transfer its voting rights to EBRD.
According to the Memorandum Cyprus signed with the Troika (IMF ECB, EU Commission), the “Resolution Authority will instruct the Special Administrator to entrust by end-January 2014, the voting rights of these shares to a well-recognised and independent consulting or auditing firm or an international institution”.

The same sources said that the EBRD could function as investment banker to manage the percentage of Laiki, but also as a strategic investor for the purchase of this share, or it could buy new shares issued by the BoC, would the Bank increased its share capital.
At the same time, it is considered that an investment by EBRD would enhance confidence in the BoC and would additionally bring expertise to the bank.

The EBRD scenario seems to present itself as an alternative to the sale of shares to hedge funds to secure liquidity, although the latter seems to have the support of the Troika.
At the same time, Τroika's contacts in the banking sector seem to focus on non-performing loans, but primarily to the recovery of the amount owed by those who have the ability to pay.

Cyprus, one year ago agreed with the EU and the IMF on a €10 billion bailout which featured an unprecedented haircut on deposits over €100,000 to recapitalize the island`s troubled banks. Bank of Cyprus absorbed the good part of Laiki Bank which has been wound down.