The Central Bank of Cyprus, in its capacity as the Resolution Authority, has notified BoC that the duties of the Board of Directors are henceforth exercised by the transitional Board of Directors until the Bank holds its Annual General Meeting on 31st August 2013.
After recapitalization is completed, the remaining 12% of the deposits that were until today blocked, will be released and will be transferred to a current/sight account within Bank of Cyprus and will be subject to the provisions of any other Decrees issued.
The remaining 88% of the total affected deposit will be converted into 3 equal new fixed term deposits with a term of 6,9 and 12 months respectively, within Bank of Cyprus. Bank of Cyprus will have the option to renew the time deposits once for the same time duration.
It is important to note that these deposits will receive a rate of interest which will be higher than the corresponding market rates offered by the BoC.
It is though, prohibited to terminate a fixed term deposit created by virtue of the present Decree, prior to its maturity, unless the funds are used for the following:
To repay a loan and/or overdraft and/or credit card within BoC
To create one or more fixed term deposits, the total amount of which is equal to the initial fixed term deposit and for a term equal to the remaining maturity period of the terminated fixed term deposit and under the same terms.
The share structure of Bank of Cyprus will be amended so that all shareholders hold ordinary shares. The new structure will be compliant with the European Capital Requirements Regulation. The first Annual General Meeting of the Bank will be set in September.
The news was welcomed by the Cyprus local and International business world with great relief and satisfaction. Contrary to popular belief of a BoC haircut of over 60%, the lower percentage of 47.5% not only gives a boost to BOC depositors but also lifts the uncertainty surrounding the BoC. The European Central Bank's requirement of a Common Equity Tier 1 ratio of 9% minimum is exceeded with the estimates setting it around 12%. Further streamlining measures are underway for BoC including a voluntary redundancy scheme as well as reduction of the number of branches in Cyprus. The above steps give the bank a healthy foundation to attain sustainability and gain back the trust of investors. The decision was taken with the consent of the European Central Bank, the European Commission and the International Monetary fund (Troika).
The Troika was in Cyprus as part of the quarterly review of the Cyprus economic program, which to everyone satisfaction was in line with the parameters set when the program was set. The overall assessment envisaged is that Cyprus is 'on track'. All the fiscal targets have been met. The authorities have taken decisive steps to stabilize the financial sector and have achieved the desirable goal (at least for the first quarter), even though continued full and timely policy implementation is essential for the success of the program. A decision was also taken as to the Cooperative banks recapitalization with the State now becoming the owner of the Coop Banks.
Realizing that this is just a small step to the right direction the government and political parties have stressed their commitment and dedication to take all necessary decisions and measures in order for Cyprus to reach its commitments.
