CYPRUS: €600m of capital securities cannot be revived – Bank of Cyprus

Bank of Cyprus, the island’s premier lender that underwent two waves of capital raising and has changed owners several times, said it cannot compensated holders of capital securities who saw €600 mln worth of their investments disappear as part of the banking sector’s controversial bailout in 2013.

A further 47.5% of unsecured deposits over €100,000 were converted to equity in the “bail-in” process to recapitalise the bank, raising just under €4 bln at the time, while a further €1 bln was raised in fresh capital from foreign and local investors in August last year that helped the bank pass the ECB stress test on capital adequacy.
The Association of Capital Securities wants a comprehensive out-of-court settlement, arguing that securities holders were tricked into buying complex banking products.
CEO John Hourican, head-hunted from RBS in November 2013, has often said he empathised with the capital securities holders, but that after capital being raised twice, with the full blessing of the Central Bank of Cyprus, there was nothing the bank could do, nor does it have the resources.
“Any proposals relating to any collective or general compensation schemes cannot be accepted or effected by the bank as there is no adequate legal basis that will support such actions,” the bank said in a reply to the association signed by chairman Josef Ackermann and senior independent board member Michael Spanos.
Noting the bank is fully aware of the social aspects of the matter as well as the severe economic conditions that many Cypriots, including many capital securities holders are now facing, the letter adds that “the bank together with other parties adopts and will continue to adopt various actions that help in alleviating the pain and economic problems of any socially affected and vulnerable categories of the people.”