BUSINESS

Demetriades reveals deal for Cyprus bailout

Cyprus and international lenders have agreed on the terms of a bailout the eastern Mediterranean country needs to refinance its banks and pay bills, European Central Bank governing council member Panicos Demetriades said on Friday.

“The memorandum has been agreed and the only thing missing is the exact amount which will be discussed at a Eurogroup meeting,” Demetriades told reporters in Nicosia. “The main thing is that there is an agreement.” Cyprus in June became the fourth euro-area nation to request a financial rescue since Greece’s 2010 bailout after Cypriot lenders including Bank of Cyprus Plc and Cyprus Popular Bank pcl were weakened by their exposure to the Greek economy.

Cypriot banks lost more than 4 billion euros in Greece’s debt restructuring. The exact amount needed to recapitalize Cypriot banks, which will determine the total bailout amount, hasn’t been established yet while the so-called troika of the International Monetary Fund, the European Central Bank and the European Commission estimates the lenders may need 10 billion euros, Demetriades said.

The deal with creditors ensures the viability of Cypriot debt, he said. The outlook for the Cypriot banking system remains negative, reflecting in part the likelihood of severe capital shortfalls, Moody’s Investors Services said on Thursday. Moody’s said it estimates that the cost of recapitalizing Cyprus’s three largest banks to a 10 percent core Tier 1 ratio, which is a measure of financial strength, will be more than 8 billion euros. Cyprus is awaiting the results of an interim report from Pacific Investment Management Co (PIMCO) that will determine the capital needs of each lender. The final report will be published in late January, Finance Minister Vassos Shiarly said on November 22. The interim figures will be published on December 7. (Bloomberg)

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