Cyprus Mail

Troika focus on banking sector

Hellenic Bank now needs to raise another €34m in additional capital out of the total of €294m noted by Pimco

INSPECTORS from the troika of international lenders – European Commission, European Central Bank, International Monetary Fund – focused mainly on the banking sector during the third day of their review mission here.

During a series of meetings held at the Central Bank’s headquarters, Nicosia, the foreign technocrats discussed with Hellenic Bank – now the island’s second largest lender following the demise of Laiki – ways of recapitalising the bank.

The bank’s cash flow and its non-performing loans were also examined.

Non-performing loans are a key concern for the international creditors; the lack of cheap credit, which has had the consequence of driving up lending rates, has made it tougher for borrowers to keep up with payments, and this against a background of a protracted economic slump.

The troika next saw officers from Alpha Bank, with whom they talked about the capital restrictions in force.

Later in the day the inspectors met with a delegation of land developers and with the association of commercial banks.

Separate troika teams simultaneously met with a range of governmental departments and agencies.
At the Planning Bureau, officials briefed the foreign inspectors of the latest rescue plan for indebted national carrier Cyprus Airways. Another topic on the agenda was the need to liberalise the so-called ‘closed professions’ on the island.

Cyprus’ creditors want to see progress in plans to privatise state-controlled enterprises, a move that is intended to raise some €1.4bn.

Also yesterday the troika technocrats asked to see a list of the assets (including real estate) held by the central government, semi-governmental organisations and local administration authorities.

In a recent report, ratings agency Fitch noted that Cypriot banks’ recapitalisations and restructurings, due to be completed by end-2013, are milestones on the roadmap for the full lifting of capital and deposit restrictions first introduced in March.

Bank of Cyprus was ‘bailed-in’ by seizing depositors’ savings.

A due diligence of the banking system by investment firm Pimco had found that Hellenic needed some €300m in extra equity in order to meet core capital adequacy requirements.

Hellenic was given till end-October to meet the regulatory minimum 9 per cent core capital ratio by private means. Reports yesterday suggested the troika does not consent to granting Hellenic an extension on that deadline.

State broadcaster CyBC reported last night that, Hellenic now needs to raise another €34m in additional capital out of the total of €294m noted by Pimco.

U.S. hedge fund Third Point was said to be bidding for a stake in the Cypriot bank. Reports said that a coalition of two companies – on the surface owned by Cypriot interests – has made a counter-offer.

Hellenic was likely expected to settle on an investor on Friday, CyBC said.

Archbishop Chrysostomos said yesterday that he hoped Hellenic could draw funds from Cypriot rather than foreign investors so that local interests can retain control of the lender.

The Church of Cyprus has a 27 per cent stake in the bank, but the shake-up could see its share shrink.

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