Brief review of developments on the cyprus banking crisis

Following the decision on Cyprus of the Eurogroup meeting held on 25 March 2013, the two major banks of the island Bank of Cyprus and Laiki Bank have been affected and their depositors were forced to contribute to the banks’ recapitalization through deposit haircut for deposits above the minimum guaranteed amount o € 100000 per depositor. More specifically the following actions were taken:

1. Laiki Bank was placed under resolution as per the The Resolution of Credit and other Institutions Law of 2013 of the Republic of Cyprus (the “Resolution Law”). Under the resolution Laiki Bank was separated into a “good” and a “bad” bank, with full protection of insured depositors (up to €100.000 per depositor). The unsecured deposits over € 100000 remained with the ‘bad’ Laiki.

2. The “good” Laiki Bank was absorbed by the Bank of Cyprus, in the framework of the resolution and restructuring of the two banks together with most of the bank’s assets and loans, including the transfer of the amount of the Emergency Liquidity Assistance (ELA) of Laiki Bank.

3. The Bank of Cyprus was capitalized through a bail-in of depositors under which 47.5% of the unsecured deposits over € 100000 has been converted into equity; account holders with deposits up to €100.000 were fully protected, in line with the relevant EU legislation

4. The existing shareholders’ equity was diluted to below 1% of the bank’s share capital while 18% of the bank’s equity was issued to Laiki Bank to compensate for the acquisition of certain assets and liabilities including the insured deposits. At the moment these shares are held by the Laiki Bank Administrator

5. The resolution process applied only to the two banks. The rest of the Cypriot banking system was not affected by the resolution process nor by the decisions of the Eurogroup.

6. Following the completion of the recapitalization of bank of Cyprus, the bank ceased to be under resolution and the duties of the Board of directors are exercised by the members of the Interim Board of Directors until the next Annual meeting of shareholders scheduled on the 10th of September 2013 in Nicosia to transact the following business:

  • To receive and consider the Directors’ report and the Consolidated Financial Statements for the year 2012.
  • To appoint the auditors of the Company and authorise the Board of Directors to fix their remuneration
  • To fix the remuneration of the members of the Board of Directors.
  • To elect members of the Board of Directors.

Μembers entitled to attend and vote at the Annual General Meeting are entitled to appoint a proxy to attend and vote on their behalf.

Depositors of Laiki Bank, would be represented by the Administrator of Laiki Bank Mrs. Andri Antoniades.

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