By George Psyllides
CYPRUS and the European Central Bank (ECB) agreed on Wednesday that bringing Bank of Cyprus (BoC) out of administration was the priority in the period ahead, as the two sides pledged to continue discussions.
The problems of the island’s banking sector following the European Union’s decision to provide financial support to Cyprus were the object of a meeting between President Nicos Anastasiades and ECB President Mario Draghi and other officials in Frankfurt.
An ECB statement after the meeting said the two sides exchanged views on the ongoing implementation of Cyprus’ macroeconomic adjustment programme.
“Both parties agreed that, in the period ahead, one priority is to bring Bank of Cyprus out of resolution,” the ECB statement said. “The asset valuation is expected for the second half of July, and the discussions will continue when these results are available.”
Wednesday’s discussions almost certainly included the matter of some €9.0 billion legacy liability transferred to BoC – under the terms of the bailout deal – from the now defunct Laiki Bank, which had been withdrawing emergency liquidity assistance from the ECB.
In a letter to European leaders in early June, Anastasiades urged them to provide a long-term and sustainable solution to liquidity issues faced by BoC.
A government statement on Wednesday said Anastasiades “raised specific issues related to the practical difficulties in the implementation of the conditions of the loan agreement and the Memorandum.”
“It was also emphasised that the European Central Bank, on its part, will continue to cooperate with the Cypriot authorities for the successful implementation of the Memorandum and for the stability and prospects of the Cyprus banking system.”
To receive the much-needed bailout, Cyprus had to agree to close Laiki, its second-biggest lender, and recapitalise BoC by seizing uninsured deposits – over €100,000.
Depositors have so far lost 37.5 per cent of their money while a further 22.5 per cent could follow the same fate.
That will be largely determined by the asset valuation.
Depositors will receive BoC equity in exchange for their losses.