Cyprus may earmark as much as 1.5 billion euros to recapitalize a single bank before a June 30 deadline set by the European Banking Authority, Finance Minister Vassos Shiarly said.
Shiarly, a former Bank of Cyprus executive, did not name the lender when he spoke to reporters in Nicosia on Monday. Central Bank of Cyprus Governor Athanasios Orphanides said on Feb. 29 that Cyprus Popular Bank Pcl, the island?s second-largest, needs 1.35 billion euros to reach the EBA?s core Tier 1 capital target of 9 percent. Bank of Cyprus needs 400 million euros, he said. The finance minister declined to specify where Cyprus would find the funds for a bank rescue.
The budget deficit in Cyprus, which has been shut out of the markets since last May, widened to 6.3 percent of gross domestic product last year from 5.3 percent in 2010, and public debt soared to 71.6 percent of GDP from 61.5 percent, according to the European Union?s statistics agency.
Shiarly said a plan that would allow Cypriot lenders access to bailout funds earmarked for the recapitalization of Greek banks was ?one of the measures being examined,? though obtaining approval would be difficult and this option couldn?t be ?quickly implemented.?
The newspaper Politis reported on April 18 that Shiarly and Orphanides had met with European Central Bank President Mario Draghi to discuss the plan, under which the Cypriot and Greek operations of Cyprus Popular Bank, formerly known as Marfin Popular Bank Pcl, would be separated, making its Greek-based unit eligible for Greek bank recapitalization aid.