The European Central Bank (ECB) has agreed on measures to help the troubled Cypriot banking system to throw off shackles which prevent it to operate normally, according to a government statement issued here on Wednesday.
Cypriot President Nicos Anastasiades traveled to Frankfurt to meet ECB President Mario Draghi ahead of a meeting of European Union (EU) leaders in Brussels, to set out problems Cypriot banks are faced with.
The statement said they agreed on unspecified measures by the ECB to help the Cypriot banks.
"They discussed ways to provide further support, with the ECB assuming a decisive role ... and agreed to continue their dialogue on implementing everything that was agreed in the meeting," said the government statement.
No details of what has been agreed upon were made available.
Anastasiades refused to talk about his requests to Draghi ahead of their meeting, saying public statements would not be helpful.
But informed sources said that his main request to Draghi was to partly convert into a medium-term bond part of a heavy bank debt incurred out of receiving emergency liquidity assistance (ELA) from the ECB prior to last year's shake up of the Cypriot banking system.
The ECB pumped 9.1 billion euros (12.4 billion U.S. dollars) into a faltering bank during a 12-month period that preceded a messy bailout of Cyprus by the Eurogroup and the International Monetary Fund in March, 2013.
The ELA debt amounted to almost two thirds of Cyprus's GDP.
International lenders offered Cyprus 10 billion euros in bailout assistance over a three-year period but forced the eastern Mediterranean island to accept an unprecedented bail-in, the recapitalization of Bank of Cyprus, the island's main lender, by converting 47 percent of large deposits into bank stock.
Bank of Cyprus, which had suffered heavy losses on account of its exposure to the Greek debt impaired by about 75 percent in 2012, was also forced to take on the assets and liabilities of the failed bank which was ultimately wound down by Cyprus's creditors.
The statement said Draghi acknowledged the significant progress made in the implementation of Cyprus's adjustment program since the bailout was agreed upon and expressed his readiness to assist the Cypriot authorities in their effort to tackle remaining problems.
Most prominent among these is securing bank liquidity to fund a recession-hit economy.
Banks are shackled by a high proportion of non-performing loans which have reached 27.1 billion euros, or 45 percent of the total loan portfolios of the banks. They are also withholding new loans as they are expected to go through an EU-wide stress test in the few coming months.
Technocrats of the Troika, the collective name the European Commission, the ECB and the IMF are known by, who are conducting their fifth survey of the Cypriot adjustment program, told lawmakers on Wednesday that they consider non-performing loans to be the biggest problem the Cypriot economy is faced with at the time.
They were also reported as saying that they would not recommend releasing the next loan tranche unless parliament passed legislation empowering banks to speedily repossess properties securing non-performing loans.
 |
| READ THE ORIGINAL POST AT www.neurope.eu |
