Greek Cyprus reveals bank bailout roadmap

NICOSIA - Agence France-Presse

A gate of Greek Cyprus’ Central Bank is seen in this file photo. The Central Bank has submit its banking system needs as a part of an EU bailout package that cost 10 billion euros. Greek Cyprus awaits signing the bailout deal with international lenders to make public the figures. AP photo

A study into how much Greek Cyprus’ exposed banking system needs as part of European Union (EU) bailout package was submitted on Feb. 2, the Greek Cypriot central bank announced.

However, the bank said the amount needed by the banks, thought to be 10 billion euros, will not be made public until cash-strapped Greek Cyprus has signed a bailout deal with international lenders.

“The steering committee has now received the final report on the due diligence review of financial institutions in Greek Cyprus conducted by Pimco and Deloitte,” a bank statement said.

“The results of the report will be made public when the memorandum of understanding is signed between Cyprus and international creditors.” The degree of bank recapitalization will determine whether Greek Cyprus needs to adopt even more austerity to make its debt sustainable.

Pimco has reportedly assessed that the banking system will need 10 billion euros to stay afloat, a figure widely circulated for several months, despite the government arguing that it should be no higher than 8 billion.

At 10 billion euros, the government would struggle to repay the loan and would need to introduce privatization of state-own utilities, such as the telecoms service, which it is loath to do.

Nicosia applied for EU financial aid in June last year when its two largest banks, hard hit by the Greek debt crisis, asked for financial assistance, but talks on agreeing a deal have dragged on. The eurozone finance ministers will be able to discuss the bailout terms now it has a firm figure for bank recapitalization.

Largest lender layoffs due to recapitalization

Meanwhile, the Bank of Cyprus, the largest lender of Greek Cyprus, announced on Feb. 1 that 229 employees have lost their jobs as the company seeks recapitalization funds from international lenders.
“The Bank of Cyprus wishes to announce that within the context of the group’s restructuring and reduction of operating costs, 229 people have left the group in Cyprus in January 2013,” it said in a statement.”With these departures, the number of staff in Cyprus has decreased by 6.4 percent and it is estimated the group will save 8.5 percent on its annual payroll costs,” the bank said.

The bank asked for state assistance in June after it fell 500 million euros short in bolstering its regulatory capital as required by the European Union.

Its second largest bank, Cyprus Popular, needs 1.8 billion euros to recapitalize, forcing a cash-strapped government to request an EU bailout to prop up the banking system.

Nicosia has signed a draft agreement with the troika -European Commission, European Central Bank and International Monetary Fund- on the terms of a loan deal, with estimates putting the amount needed at around 17.5 billion euros.