The Bank of Cyprus (BOC) on Monday issued an announcement on the measures that have been implemented, following the Eurogroup decision on Cyprus on March 25th.
According to the announcement, a recapitalisation through a bail-in of depositors (a deposit-to-equity conversion) will take place, ensuring that BOC fully satisfies the minimum capital adequacy requirements and maintains a Core Tier 1 of 9% under the adverse scenario developed by PIMCO in December 2012.
Depositors with deposits up to €100.000 that are exempt as per the relevant decree have been fully protected.
BOC also announces the acquisition of the insured deposits and the majority of the assets and loans of the Cyprus Popular Bank Public Co Ltd (“Laiki Bank”).
BOC will service all Laiki’s customers in Cyprus based on existing terms and all employees of Laiki in Cyprus have been transferred to BOC with the same terms and conditions. BOC’s loans, fixed assets and deposits in Greece have been transferred to Piraeus Bank.
“The restructuring and recapitalisation of BOC follows the decisions of Eurogroup and aims at creating a well-capitalised, healthy and resilient bank able to serve the needs of its customers and support the Cyprus economy”, the statement reads.
As a result, it is added, BOC has solidified its position as the leading financial institution in Cyprus, has significantly strengthened its capital position, has minimized its exposure to the Greek economy, has access to ECB liquidity and remains owned by private shareholders.
The above major changes, BOC points out, mark a new era for the Bank of Cyprus Group.
According to the statement, the recapitalisation and restructuring of the Group was achieved by the decrees issued on 25 March 2013 and 29 March 2013 by the Central Bank of Cyprus in its capacity as the Resolution Authority, through the powers vested under the Resolution of Credit and Other Institutions Law, 2013.
The Eurogroup reached an agreement with the Cypriot authorities on March 25th on the key elements necessary for a future macroeconomic adjustment programme of 10 billion euro.
A haircut of around 40% on deposits over 100.000 euro at Cyprus’ largest bank, Bank of Cyprus will be imposed, 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. The program also provides for downsizing of the public sector and privatizations.
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.
