Cyprus Banks restructured

The Central Bank of Cyprus today intervened to quash frantic reports that Cyprus Popular Bank is to be closed down.
The reports sent hundreds of Cyprus Popular Bank employees and holders of the bank’s bonds out into the streets. Police deployed a strong force outside the Bank’s headquarters in the capital Nicosia to prevent them smashing into the building.
Central Bank spokeswoman Aliki Stylianou told our television station that the reports were unfounded, with efforts under way to find the best possible solution.

The Central Bank has urged Parliament to vote tonight a bill that will help purge and recover the island’s ailing banking system and save its second largest bank, Laiki (Popular) Bank.

Governor Panicos Demetriades said that a bill to implement the plan has been placed with the House of Representatives and it could be voted on Thursday evening.

He told reporters that the Central Bank has suggested that the House of Representatives immediately votes on the legal framework to “purge and recover the Cyprus banking system”.

He said that “by establishing this legal framework, resolution measures will be imposed on Popular Bank so that it will be in a position to continue to offer banking services to its clients next Tuesday,” when banks are expected to reopen.

Otherwise, Laiki Bank will immediately go into bankruptcy and its operations will cease, leading to destructive repercussions for the workers, depositors and the banking system and economy of our country”, he added.

Demetriades said the “resolution process” will avert bankruptcy, and protect savings up to €100,000.

Purging, he added, is an important step in the direction of achieving an agreement for economic backing of the Republic of Cyprus from the European Exchange Mechanism and the IMF, while at the same time, creates the conditions for the necessary liquidity in the Cyprus banking system.

It has been said that a plan has been worked out to restructure the bank under a scheme which provides for transferring its deposits of up to 100.000 euros, along with good loans and some other assets to the Bank of Cyprus.
This in effect means a merger of the two banks and a downsizing of the Cypriot banking system as demanded by the Eurogroup.
Cyprus Popular Bank will keep the bad portfolios and deposits of over 100.000 euros. Owners of these larger deposits will get whatever can be collected out of re-negotiating bad loans and the bank’s property

 

Parliamentarians are expected to vote on the bills that were placed in the House later this evening