The decision to sell local units of Cypriot Banks in Greece to Greece`s Piraeus Bank was a political one and under the circumstances it was correct, Governor of Central Bank Panikos Demetriades said on Tuesday, before a meeting of the House Committee on Institutions which continued the discussion on the specific issue.
In statements to the press following the meeting, Chairman of the Committee Demetris Syllouris said that a series of very critical issues came to light during the discussion, noting that the fact the meetings are held closed, gives the opportunity to the lawmakers to engage in a deep and detailed discussion.
He also expressed the opinion that the outcome of the House discussions will be of great assistance if the state has the means and mechanisms to take corrective measures.
In a statement issued in the afternoon following the discussion, Central Bank Spokeswoman Aliki Stylianou noted that, under the circumstances, there was no alternative but to sell the Cypriot banks in Greece as this was set as a prerequisite for the final approval of the rescue package for Cyprus.
She went on to say that in the Memorandum of November 2012 there was a closure according to which, when the bank resolution process is over, the banking sector will be much smaller, stronger and viable.
Stylianou also said that on the basis of the European Central Bank regulations for the European Liquidity Assistance, the Cypriot Banks were trustworthy and the decisions were taken having in mind the recapitalization through the rescue package.
According to Stylianou, during the Eurogroup meeting on March 25, a decision was taken for assistance to Cyprus worth 10 billion euros, of which no amount was to be provided for the recapitalization of either Laiki Bank or Bank of Cyprus. She added that, in the framework of this decision, the sale of the Cypriot branches in Greece was considered a prerequisite.
The Eurozone Finance Ministers, collectively known as the Eurogroup, decided to provide €10 billion financial assistance to Cyprus, after imposing losses to uninsured bank deposits in a bid to recapitalize the island`s troubled banking sector, heavily exposed in Greece.
As part of the bailout, Bank of Cyprus, the island`s largest lender, absorbed the good part of Cyprus Popular Bank (insured deposits and loans). Furthermore, 27.5% of uninsured deposits in BoC have been converted into equity, whereas an additional 22.5% remains frozen until an evaluation of the Bank`s assets.
