Bank of Cyprus asks questions about Greek banks’ moves

NICOSIA (Reuters) – Cyprus’s central bank has asked Greek banks Piraeus and Marfin about their acquisition of shares in two Cypriot banks, saying yesterday it wanted them to clarify their intentions. The Cypriot monetary authority, which must approve all acquisitions exceeding 10 percent in a banking institution, said it wanted to know what Bank of Piraeus intended to do with Bank of Cyprus. Earlier yesterday Piraeus disclosed it had acquired 6.7 percent of Bank of Cyprus, the island’s largest bank, which is separately bidding to acquire Emporiki Bank in a cash-and-stock offer. In the case of Marfin, the central bank said it had launched an inquiry into an «unconfirmed» report the Greek lender had cooperated with an offshore fund, Tosca, to build up a stake in Laiki Bank exceeding 10 percent, and thereby sidestepping regulatory approval. The central bank’s governor, Christodoulos Christodoulou, had written to both Greek banks. «Stern recommendations were issued to both,» the central bank said in a statement. Laiki and Bank of Cyprus dominate the island’s banking, holding between them an estimated 60 percent of the Cypriot market. The island’s banks have been relatively closed to outsiders until now. «There is definitely some apprehension. We can’t stay a small insulated society forever, but people here realized it a bit too late,» said one Cypriot broker, who asked not to be named. Central bank officials have privately expressed annoyance with a perception of being kept in the dark by Greek banks over their plans. On Monday, Bank of Cyprus took the unprecedented step of chiding Piraeus’s moves. Bank of Cyprus is competing with France’s Credit Agricole to take over Emporiki. The Cypriot bank has denied persistent rumors that one of its objectives in mounting the bid was to fend off a takeover by Piraeus. Piraeus said its holding was part of a strategy to grow further in Greece and Southeastern Europe and that it had no bearing on Bank of Cyprus’s bid to acquire Emporiki Bank. Its moves have left market watchers wondering on its ultimate objective. Investment bank UBS said it was cautious on Piraeus’s increased stake in BoC as it was unclear how Piraeus would extract value through some sort of cooperation. «The now 6 percent interest in BoC accounts for 14 percent of Piraeus’s 2006 estimated capital. In our view that is a sizeable concentration of capital for a retail bank,» UBS said in a research note on Bank of Cyprus.

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