Central Bank of Cyprus struck a deal with Troika to a 47.5% haircut on deposits exceeding 100,000 EUROS in the Bank of Cyprus. Developments

Troika’s delegation along with representatives of the European Commission and European Central Bank have been in the island since 17th of July in order to assess if Cyprus is meeting troika’s set – targets as agreed and signed in a memorandum of understanding last March

Government of Cyprus via the deputy government spokesman Viktoras Papadopoulos announced yesterday that Cyprus's Central Bank agreed with Troika for 47.5 percent haircut on deposits exceeding 100,000 EUROS in the Bank of Cyprus in an attempt to recapitalize it.

As Mr. Papadopoulos also added that "during the meeting in Nicosia, participants noted there was a hopeful stabilization of the situation which will give an impetus to the economy to get back on track to exit the crisis"

The common Official of announcement Cyprus Central Bank and Ministry of Finance

Some hours ago Central Bank of Cyprus along with the Ministry of Finance issued the official announcement regarding their agreement with Troika for the final hair-cut of Bank of Cyprus whereby  the Bank of Cyprus has been fully recapitalized by the overall conversion of 47,5% of uninsured deposits into shares in the bank.

This agreement comes to put an end to a long period of uncertainty and puts Bank of Cyprus into the final stage of the resolution process.

The announcement highlights that “the recapitalisation ensures that the BoC well exceeds its minimum capital adequacy ratio. Based on the latest financial information, BoC's Common Equity Tier 1 ratio is estimated to stand at around 12%”.   In parallel, Central Bank of Cyprus will notify the BoC today that it is no longer in resolution as of today’s date. 

Following the recapitalization of BoC, 12% of deposits that were previously blocked will be released (5% in total).

The balance will be split evenly into three separate time deposits of six, nine and twelve months, respectively. BoC will have the option to renew the time deposits once for the same time duration. These deposits will receive a rate of interest which will be higher than the corresponding market rates offered by the BoC.

The share structure of BoC will be amended so that all shareholders hold ordinary shares. The new structure will be compliant with the European Capital Requirements Regulation.

Legacy Laiki depositors will be compensated through shares in BoC, amounting to around 18% of share capital in the combined group.

As the announcement concludes, “the recapitalisation of BoC and its exit from resolution are key milestones in the rejuvenation of BoC’s financial standing which will underpin its resilience and ability to support the Cyprus economy and thus assist in stabilizing the financial sector in Cyprus.”