The Ministry of Finance and the Central Bank of Cyprus (BoC) announced on the 30th of July that the Bank of Cyprus has been fully recapitalised by the overall conversion of 47,5% of uninsured deposits into shares in the bank. That was the final stage of the bank’s resolution process and the announcement said there will be no further measures under the Resolution Law.
The recapitalisation ensures that the BoC well exceeds its minimum capital adequacy ratio. Based on the latest financial information, BoC’s Common Equity Tier 1 ratio was estimated to stand at around 12%.
The announcement states that following the recapitalisation, 12% of deposits that were previously blocked will be released (i.e. 5% of the 42,5%). The balance will be split evenly into three separate time deposits of six, nine and twelve months, respectively. BoC will have the option to renew the time deposits once for the same time duration. These deposits will receive a rate of interest which will be higher than the corresponding market rates offered by the BoC. The share structure of BoC will be amended so that all shareholders hold ordinary shares. The new structure will be compliant with the European Capital Requirements Regulation.
It is further mentioned in the announcement that legacy Laiki depositors will be compensated through shares in BoC, amounting to around 18% of share capital in the combined group.
The recapitalisation of BoC and its exit from resolution are key milestones in the recovery of BoC and it will assist in stabilizing the economy of Cyprus.