Bank of Cyprus reinstated as an eligible counterparty by ECB

The Bank of Cyprus Public Company has announced that it has been reinstated as an eligible counterparty by the European Central Bank (ECB) for monetary policy operations.

A statement by the BOC said the reinstatement follows the Bank’s recapitalization through a bail-in of depositors1 (a deposit-to-equity conversion) and the Bank’s exit from resolution.

The combination of the restoration of counterparty status and the approval at the beginning of July for the use of bonds issued or guaranteed by the Republic of Cyprus will result in a reduction in funding from Emergency Liquidity Assistance (ELA), as the Bank will have access to direct funding from the ECB for monetary policy operations.

Furthermore, ECB funding will be under improved terms, given that the rate for main refinancing operations stands at 0,5%.

On July 30, the BOC left the resolution regime having strong capital adequacy.
As part of a €10 billion rescue package for Cyprus, Bank BOC, the island`s largest lender, entered a resolution process, with an initial 60% of deposits over €100,000 blocked for capital to equity conversion to recapitalize the bank.

However, the final figure was reduced at 47.5% following the completion of an independent evaluation of the Bank`s balance sheet, after it absorbed the "good part" of Laiki Bank which will be wound down.