It is important to ensure sufficient liquidity and enough capital for the banking sector in Cyprus, European Commissioner for Economic and Monetary Affairs Olli Rehn has said.

In a written answer to a written question submitted to the Commission by the Cypriot MEP Antigoni Papadopoulou, EU Commissioner says that “once these goals are achieved, and confidence returns, banks can be expected to restart the normal flow of credit to the economy.

In response to a series of questions submitted by the Cypriot MEP, the Commissioner, Olli Rehn notes that the merger between Bank of Cyprus and Cyprus Popular Bank was carried out under the responsibility of the Cypriot authorities according to Cypriot law.
“The combined new entity will indeed have a market share of about 40%. However, the new Bank of Cyprus will operate in an environment where Hellenic Bank, the credit cooperative institutions, and foreign credit institutions will be its direct competitors”, he adds.

On the basis of the available information the transaction was not of a dimension which would have required a notification under EU merger rules, which apply only if certain turnover thresholds are reached.

Excluded from international markets since April 2011, Cyprus applied for financial assistance from the EU bailout mechanism in June 2012, after its two largest banks sought state aid following massive write-downs of Greek bond holdings amounting to €4.5 billion.

Cyprus and its international lenders (the European Commission, the European Central Bank and the IMF) agreed late March on a €10 billion bailout programme, which provided for a haircut on uninsured deposits in the island`s two largest banks.
Under the agreement, Cyprus Popular Bank, Cyprus` second largest lender, would be wound down and its good part will be absorbed by Bank of Cyprus, the island`s largest lender.

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