Bank of Cyprus converts portion of uninsured savings to equity

Cypriot lender Bank of Cyprus said on Sunday it had carried out a conversion of uninsured cash deposits in the bank into equity, one of the conditions of international lenders to offer the cash-starved island financial aid.

The process, known as a ‘bail-in’, made depositors in the bank pay for its recapitalisation, after the institution was hit by massive losses from its exposure to debt-crippled Greece.

Bank of Cyprus, the island’s largest bank, said it had converted 37.5 percent of deposits exceeding 100,000 euros into «class A» shares, with an additional 22.5 percent held as a buffer for possible conversion in the future.

Another 30 percent would be temporarily frozen and held as deposits, the bank said.

A spokesman for the bank said he was not authorised to say what the percentage corresponded to in cash terms. The precise recapitalisation needs of the bank will be concluded at the end of June.

The bail-in, including the dissolution of Cyprus’s second-biggest lender Popular Bank, is part of attempts by Cyprus to find 13 billion euros to shore up its economy.

The European Union and the International Monetary Fund are providing a further 10 billion to the island, one of the euro zone’s smallest economies.

Cyprus’s parliament was due to vote on the bailout on April 30. The EU and the IMF were expected to disburse a first tranche of aid to the island in May.