THE Finance Ministry said on Monday it had bought the shares in Cyprus Popular Bank, after the state pledged on May 17 to underwrite Popular’s attempt to raise €1.8 billion in equity.
Cyprus, which assumed the rotating EU presidency on July 1, became the fifth euro zone member to seek a financial lifeline from its European partners last week.
A team from the European Commission, the IMF and the European Central Bank were expected to start consultations with authorities on Tuesday.
Cyprus’ banking system has been heavily exposed to Greece, with Popular and Bank of Cyprus posting mammoth losses on writedowns of Greek sovereign paper, agreed by European leaders to make Greece’s debt pile more manageable.
The cost to bail out both banks, at about €2.3 billion, represents a sizeable chunk of Cyprus’ €17.3 billion economy and one the island can ill afford while it is shut out of international debt markets.
Private demand for shares in Popular Bank’s rights issue was minimal and the bank said it had received applications for just €3.013 million worth of stock.
Three days before the expiry of a European Banking Authority deadline for bank recapitalisation to meet capital strength benchmarks, Bank of Cyprus also asked for €500 million in temporary state support. That bid would be discussed in the context of the bailout.
“Banks’ capital needs will be assessed after a thorough examination of their assets and in respect of EU state aid rules,” the finance ministry said.
Reuters
Jim, it certainly won’t be from property developers paying up their mortgages.
As the EU inspectors are just arriving today to begin their examination of the books, I wonder where the government got the money to pay for the shares?