Pimco accepts Cyprus banking sectors recapitalization needs are up to 9 billion euros

Pimco, which carries a due diligence on the Cyprus banking sector, appears to estimate the amount needed for the sector’s recapitalization around 9 billion euro and this is the extreme scenario, reliable sources have told CNA.

“There is a reduction in the amount of the extreme scenario bringing it close to 9 billion euro based on developments so far” the sources have said, adding however that “this amount is still under negotiation by the members of the Steering Committee” which comprises representatives of both the Cyprus authorities and its international lenders (EC, ECB, IMF).

During the negotiations, the same sources have said, Cyprus’ efforts focus on further reducing the amount of 9 billion.

Pimco representatives were visiting the island to participate in a meeting of the Steering Committee on issues related to Pimco estimations as regards the total amount of the Cypriot Banks’ capital needs. The Steering Committee oversees the due diligence review on the Cypriot banking system carried out by Pimco. It includes representatives from the European Commission, the European Central Bank, the European Stability Mechanism, the International Monetary Fund, the European Bank Authority, Cyprus Finance Ministry, the Central Bank of Cyprus and Cyprus Authority for the Supervision and Development of Cooperative Societies.

The bank’s recapitalization needs are of crucial importance to Cyprus, as they will determine the size of the bailout required. Cyprus applied for a bailout on June 25, 2012, after its two largest banks turned to the state for financial assistance, having sustained a severe hit due to their heavy exposure to Greek bonds.