Cyprus

Shareholders in Bank of Cyprus elected a new board of directors amid noisy protests by uninsured depositors who lost a significant portion of their savings through an unprecedented bail-in agreed with the EU and International Monetary Fund in March, the Financial Times reported. Angry Cypriots attending an extraordinary general meeting of BoC shareholders complained over a reduction in the nominal value of the bank’s shares from one euro to one cent in a mandatory recapitalisation overseen by an interim board of directors. Dozens of shareholders walked out of the meeting in protest.

Cyprus is having its worst economic downturn since the 1970s and that's bad news not only for Cypriots but also for Germans and other eurozone members, United Press International reported. Fears over what German taxpayers may have to do next to bail out Greece are already an election issue as German Chancellor Angela Merkel seeks a third term in Berlin's Bundestag parliament elections Sept. 22. Greek and Cypriot economies are so interlinked that Greek economic troubles are seen behind the crisis that forced Cyprus to seek EU help in return for a crushing austerity program.

When European leaders engineered a harsh bailout deal for this tiny Mediterranean nation in March, they cheered the end of an economic model fueled by a flood of cash from Russia. Wealthy Russians with money in Cyprus’s sickly banks lost billions. But the Russians, though badly bruised, are now in a position to get something that has previously eluded even Moscow’s most audacious oligarchs: control of a so-called systemic financial institution in the European Union, the International Herald Tribune reported.

Cyprus’s economic reform programme is on track, but substantial risks remain, according to EU and International Monetary Fund monitors, the Financial Times reported. The island’s prospects are regarded as remaining uncertain as authorities struggle to contain a deepening recession and rebuild confidence in the battered banking system. “While the authorities have started to implement the programme with determination, risks remain substantial. . .

The Cyprus government and central bank on Tuesday announced milder than expected final terms of a bail-in for uninsured depositors at Bank of Cyprus but signalled it could take years before their remaining funds are fully unfrozen, the Financial Times reported. Deposits above the guaranteed limit of €100,000 will face a 47.5 per cent haircut, while an additional 5 per cent of total deposits would be made available for withdrawal by account holders on top of the 10 per cent already returned in cash, according to a joint statement by the finance bank and the central bank.

The Cypriot government wants the restructuring of the bailed-out country's biggest bank to be completed by the end of this month, its spokesman said Tuesday, The New Zealand Herald reported on an AP story. Christos Stylianides said that once the restructuring is completed, management of the bank will return to its directors and shareholders.

Instead of fixing Cyprus’s problems, a tough rescue package for the Mediterranean nation has helped turn what began as a banking fiasco into a deep slump across an economy that, according to forecasts by the International Monetary Fund, will shrink by 9 percent this year and 4 percent next year, the International Herald Tribune reported. That is bad enough, but, given the I.M.F.’s record of underestimating the pain to be suffered by earlier bailout recipients like Greece, the bleak forecast could prove too optimistic.

Cyprus's central bank must complete the process of radically restructuring the country's biggest lender, Bank of Cyprus PCL by early August at the latest, Cypriot finance minister Harris Georgiades said. Capital controls in place on the island since March are hindering economic activity and should be lifted as soon as confidence in the financial sector recovers and more cash is in the system, he said in an interview, The Wall Street Journal reported.

Cyprus said on Tuesday it was not trying to wriggle out of terms of an EU/IMF bailout imposed on the island, but said some provisions of the deal needed tweaking to address problems in its battered banking sector, Reuters reported. "Every effort will be applied so our positions are met with understanding by our partners... We are not seeking re-negotiation but an adjustment of certain measures," Cypriot President Nicos Anastasiades told reporters.

Cyprus’ president has asked eurozone leaders for a complete revamp of his country’s €10bn bailout, warning Nicosia may not be able to meet the rescue’s current terms because it has harmed the country’s economy and banking system even more than expected.