Cyprus to promote legal framework for covered bonds

The Finance Ministry and the Central Bank decided on Thursday to create the legal framework for the issue of covered bonds of approximately three billion euro in a bid to inject additional liquidity into the Cypriot market.

Finance Minister Charilaos Stavrakis and representatives of the Cyprus Central Bank (CCB), the commercial banks and employers associations examined today the first draft, prepared by the CCB on the issue.

Covered bonds are issued from credit institutions by submitting their loan portfolios as collateral to the European Central Bank, in a bid to pump liquidity from the Eurosystem.

''It was decided to press on immediately with all procedures for the issue of covered bonds which can bring to the economy significant additional cheap liquidity,'' Stavrakis said after the meeting.

Replying to questions, Stavrakis said that according to initial estimates the covered bonds will be worth 3 billion euro, adding that these bonds usually have a ten-year duration.

He also said that the Finance Ministry and the Central Bank are examining other alternative liquidity sources from the Eurosystem ''not excluding the issue of special three- year bonds.''