By Kyriacos Kyriacou – Nicosia
The release of €950mln-worth in fixed-term deposits in Bank of Cyprus -the largest bank of the island- is considered as the “first big test” for Cyprus’s damaged banking sector, which, according to the government is now stabilising. Deposits, which were retained in accordance to the recapitalization decree and issued in July 2013 are to expire today. Government sources say that 950 million will remain in Cyprus to be used by depositors to boost businesses, either to repay debts, either for personal needs.
“The release is important”
The Ministry of Finance and the Central Bank of Cyprus (CBC) consider the decision of the Bank of Cyprus to release fixed-term deposits as very important. “This move by the Bank of Cyprus indicates that our banking system is on the course to stabilisation and will help to strengthen the confidence of the public and investors in our banking system,” a press release by the CBC says. The Ministry of Finance and the CBC will continue their efforts to fully restore financial stability which, in turn, will be essential for the recovery of the Cyprus economy, it notes.
The decision was announced yesterday by the Bank of Cyprus Board Chairman, Christis Hasapis. He said that this decision was the result of the bank’s significant liquidity improvement over the last few months, which resulted in the stabilization of the deposit base. The Bank of Cyprus s returning the trust shown by its depositors and that this moves is an attempt to reinforce the real economy and boost the cash flow in the market, he added.
Last March, the Cypriot authorities agreed with the Troika on a €10 billion bailout to secure the state`s financing needs and to save the island`s banking system that came at the brink of collapse due to soaring non-performing loans and the haircut of Greek debt that whipped out the Cypriot banks Greek bond holdings amounting to 4.5 billion euro. However, the bailout featured a haircut of unsecured deposits and the selling of the Cyprus banks branches in Greece. The measures caused panic to depositors and therefore bank restrictions were decided.