Cyprus authorities reach agreement with Troika on BOC shares

Cyprus authorities and the Troika (EC,ECB and IMF) reached an agreement on Thursday as regards the issue of the annulment of Bank of Cyprus shares, following the recent decision of the Eurogroup.

A haircut of around 40% on deposits over 100.000 euro at Cyprus’ largest bank, Bank of Cyprus will be imposed, according to the Eurogroup decision, whereas Laiki Bank will be resolved in a good and bad bank immediately – with full contribution of equity shareholders, bond holders and uninsured depositors – based on a decision by the Central Bank of Cyprus, using the newly adopted Bank Resolution Framework. Laiki deposits of up to 100.000 euro are guaranteed.

According to reliable sources who spoke to CNA, the agreement was reached Thursday midnight, following a lengthy meeting of the Finance Minister and the Central Bank Governor with the Troika delegation.

The agreement provides for the replacement of the word “write off” (referring to shares) with the word “haircut” in accordance with the Bank Resolution Framework.

The sources also told CNA that soon there might be an agreement as regards the issue of the offset of loans and deposits.

Excluded from international markets, Cyprus applied in June 2012 for financial assistance, after its two largest banks sought state aid, following massive write downs of their Greek bond holdings amounting to €4.5 billion or 25% of the island`s GDP, as a result of the Greek sovereign debt haircut.