The Ministry of Finance and the Central Bank of Cyprus have jointly announced that the recapitalisation of Bank of Cyprus (BoC) is now complete. Forty-seven and a half per cent of “uninsured” deposits (that is, the excess of deposits over €100,000) as at the time the bank was placed under the resolution regime have been converted into shares, giving a Common Equity Tier 1 ratio estimated at approximately 12 per cent, well above the required minimum. This is the final stage of the bank’s resolution process and, according to the announcement, there will be no further measures under the Resolution Law.
Early in the resolution process 37.5 per cent of the excess of customer deposits over €100,000 was earmarked for conversion into shares and a further 22.5 per cent was withheld as a contingency reserve pending an assessment of the bank’s financial position and capital needs. Now that the assessment has been completed a further 5 per cent of the “uninsured balance” will be returned to depositors. The remainder, after deduction of the amount converted to shares, will be divided into three equal separate time deposits of six, nine and twelve months, respectively carrying an enhanced rate of interest. On maturity BoC will have the option to renew the time deposits once for the same duration.
Depositors in Laiki Bank who have lost money will receive shares in BoC representing approximately 18% of its share capital as compensation for their losses.
According to the announcement, the capital structure of BoC will be amended so that all shareholders hold ordinary shares and the new structure will be compliant with the European Capital Requirements Regulation.
The recapitalisation of BoC and its exit from resolution mark a milestone in the rehabilitation of the banking sector in Cyprus and its eventual return to normal operation.
Source: Andreas Neocleous & Co LLC
