Cyprus Mail
Cyprus

Crucial talks on BoC’s future

By George Psyllides

SHARES of the new Bank of Cyprus (BoC) could start trading by October, the head of the Securities and Exchange Commission (CySEC) said yesterday, ahead of a crunch meeting today on the future of the stricken lender.

“I think that around October is the period when this could be done,” Demetra Kalogirou said, after a meeting with international lenders.

Trading of BoC shares has been suspended after the lender was put in administration in the wake of an EU decision to bail out the island in March.

The decision also included closing the island’s second biggest bank, Laiki, whose shares were also suspended.
Kalogirou said the suspension has greatly affected the stock market (CSE) as the two big banks made up 80 per cent of its value.

Laiki stock will be stricken off of the CSE registry on Monday.

As part of the €10 billion deal, BoC would have to recapitalise using customer deposits exceeding €100,000 – a process known as bail-in.

The plan also entailed transferring certain Laiki assets to BoC.

So far, 37.5 per cent of uninsured deposits have been seized and an additional 22.5 per cent was blocked and could follow the same fate.

An independent audit of BoC assets is under way, which would define precisely how much of depositors’ cash would be seized.

The matter, along with proposals concerning the future of the lender, will be discussed today between Cypriot officials and a delegation of the international lenders – the troika.

It is understood that one proposal would be to break BoC in two, separating banking operations and real estate holdings through the creation of an asset management company.

Resolving the BoC issue would pave the way for the gradual removal of capital controls introduced in March to prevent bank runs.

Although foreign banks on the island were exempt from most restrictions imposed under the bailout, customers at banks in Cyprus are limited to withdrawals of up to €300 a day, cheques cannot be cashed and bank transfers are vetted.

Those restrictions are adding to an acute credit crunch caused by financial institutions which are jittery about their balance sheets in a rapidly deteriorating economy and have put the brakes on lending.

A troika delegation is currently assessing the island’s progress in implementing the bailout terms. The appraisal will weigh on if and when Cyprus will receive the next tranche of the assistance.

President Nicos Anastasiades cautioned against promulgating so-called expert views, pending the outcome of the review.

“What I advise is to be patient and I think we are sufficiently prepared to get the best possible results,” Anastasiades said. “We are at the initial stages.”

He was echoed by Finance Minister Harris Georgiades who said the government would not rest until the objectives were attained.

Georgiades said the economy appeared to be doing slightly better than expected in the first five months but “we do not count on this somewhat better performance.”

“On the contrary we are planning on the basis of much more conservative estimates,” he said.

The minister said there was a difficult period ahead for Cyprus and planning was based on this.

“We do not want to repeat the previous years’ mistakes i.e. to plan on the basis of overly optimistic estimates that were proven wrong very early,” Georgiades said.

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