Cyprus Mail
Business

First draft of troika report due

By Elias Hazou

A FIRST draft of the troika’s assessment of Cyprus’ implementation of the loan memorandum is expected to be handed over to the government either today or during the weekend, reports said yesterday.

A number of media outlets report that so far the troika’s review is a positive one. The mission arrived here on July 17 and departs at the end of the month. Their evaluation will determine whether Cyprus gets the next tranche of bailout money.

Yesterday morning troika technocrats convened anew with finance ministry officials in a follow- up meeting on progress achieved so far.

The Cyprus News Agency cited sources as saying the troika has been asked to hand over a first draft of its assessment before the weekend if possible so that the ministry can then come back with its observations.

The government is seeking to make the most of the next few days to close all pending issues with regard to the MoU and its implementation with a view of clinching a positive assessment.

The Central Bank was yesterday handed a report on the balance sheet of Bank of Cyprus (BoC). The highly-anticipated evaluation, assigned to KPMG London, will determine the final size of the ‘haircut’ on deposits needed to adequately recapitalise the lender – in what has come to be known as a ‘bail-in’.

Already large savers have taken a hit of 37.5 per cent, and a further 22.5 per cent of their money over and above €100,000 has been frozen and set aside as a buffer.

KPMG London is also set to deliver its findings on the ‘bad’ Laiki, possibly today.

Cyprus and its international lenders (European Commission, European Central Bank and IMF) agreed late March on a €10bn bailout programme, which featured a haircut on uninsured deposits in the island`s two largest banks, BoC and Laiki.

Laiki was wound down with its assets and insured deposits absorbed by BoC, currently under a consolidation procedure.

The haircut could reach around 50 per cent of uninsured deposits, the BoC’s interim board chairman said yesterday.

Speaking to the state broadcaster, Sophocles Michaelides said however that these were his own estimates.

Michaelides went on to describe the plan to segregate BoC into two entities – a purely retail operation and an asset investment bank – is the best solution available to ensure the lender remains a solvent going concern.

The plan is part of a broader restructuring of the bank being worked on by consultants McKinsey in collaboration with the banking regulator.

The blueprint for splitting BoC would be completed by late September and handed to the bank’s new administration after the election of a new board, Michaelides said.

The bank is pressing ahead with the plan despite fierce opposition from politicians and lobbying by big land developers seeking to nip the idea in the bud.

Detractors say that a real estate bank seizing and auctioning off collaterised properties will end up driving down real estate prices in general.

Advocates argue that divesting the bank’s retail operations from real estate loans – many of them non-performing – will put the lender’s finances on a sounder footing in the long term.

Meanwhile the news from the Central Bank yesterday was not good; capital leakage from Cypriot banks accelerated in June, according to data released by the regulator.

Deposits held in Cypriot banks dropped by another €5.3bn last month. Total deposits were €50.669bn in June, compared to €56.020bn in May. In April, deposits stood at €57.370bn.
Loans also shrank, but by a smaller percentage, falling to €67.790bn from €68.183bn in May, registering an increase in the overall loan-to-deposit ratio.

The figures posted did not feature a breakdown by bank.

Back in June 2012, total deposits stood at €70.772bn, loans at €71.690bn.


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