Cyprus two largest banks may need additional capital, EBA says
2012-07-13 12:20:21
The two largest Cypriot banks, Bank of Cyprus and Cyprus Popular Bank, may need additional capital to reach the 9% Core Tier 1 Capital ratio, the European Banking Authority (EBA) has said.
"The two Cypriot banks taking part in the capital exercise, Bank of Cyprus and Cyprus Popular, have not been able to reach the 9% core tier target by actions in the private market," EBA which conducted an overview of the December 8 2011 capital exercise.
It notes that "nevertheless, the EBA has received reassurance that these banks will comply with the EBA Recommendation as a result of the government’s decision to request the support of the EFSF."
"It is possible that additional capital needs for these two banks will be required after assessment by the relevant EU authorities and the IMF in the framework of the assistance programme," the EBA added.
The December 8 capital exercise showed that Bank of Cyprus and Cyprus Popular Bank (CPB) should secure an additional capital of 3.53 billion EUR to reach the 9% Core Tier 1 ratio.
The two banks were severely hit by a 76% write down of Greek bonds following the Greek sovereign debt haircut. On 25 June, Cyprus which acts as an underwriter of CPB 1.8 billion EUR capital issue, submitted an application for financial support by the EU bailout mechanism (EFSF). Last week a team of experts by the European Commission, the European Central Bank and the International Monetary Fund visited a Cyprus to a assess the capital requirements of Cyprus` banking sector as well as the public refinancing requirements. Bank of Cyprus requested 500 million EUR from the state to secure its recapitalisation.
Andrea Enria, Chairperson of the European Banking Authority, said "our work in strengthening the capital base of banks is proceeding to plan. European banks are now in a stronger position, which should support lending to the real economy and gradually restore banks’ access to market funding."