Print

Final report of the EBA on the recapitalisation exercise (3 October 2012)


The Central Bank of Cyprus notes the announcements made today by the European Banking Authority regarding the final assessment of the capital exercise and fulfilment of the EBA December Recommendation, which demonstrate a capital shortfall, as at 30 June 2012, for the two participating Cypriot banks of €1.855 million. The capital shortfall is being addressed through the implementation of corresponding backstops with the explicit support of the Cyprus Government.

In June 2012, the Cyprus government requested financial support from Euro area Member States, through the EFSF/ESM, and international support from the IMF, in the framework of a full assistance programme. The programme will encompass measures to ensure the stability of the financial sector, actions to carry out the fiscal adjustment to support the ongoing process of fiscal consolidation and structural reforms. Preliminary discussions leading to a Memorandum of Understanding have already taken place and further discussions are expected during the current month in order to finalise and sign the Memorandum of Understanding. Under the EU/IMF programme, an asset quality review of the Cypriot banks will start very shortly, including a stress test exercise, with the aim to determine the eventual capital needs of the banks.

Background of the EBA capital exercise

The EBA Recommendation on the creation of temporary capital buffers to restore market confidence was adopted by the Board of Supervisors on 8 December 2011 to address the difficult situation in the EU banking system, especially with regard to the sovereign exposures, by restoring stability and confidence in the markets. The Recommendation was part of a suite of measures agreed at EU level.

The Recommendation called on National Authorities to require banks included in the sample to strengthen their capital positions by building up an exceptional and temporary buffer such that their Core Tier 1 capital ratio reaches a level of 9% by the end of June 2012. In addition, banks were required to an exceptional and temporary capital buffer against sovereign debt exposures to reflect market prices as at the end of September 2011. The amount of the sovereign capital buffer has not been revised. 

The initial sample of the Capital Exercise included 71 banks. However, the 6 Greek banks were treated separately as the country is currently under an EU/IMF assistance programme. Moreover, 4 banks (Öesterreichische Volksbank AG, Dexia, WestLB AG and Bankia) from the original sample have been identified as undergoing a significant restructuring process, and are being monitored separately. Therefore, the final assessment published today refers to 61 banks.

Analytical information on each bank is shown below together with a link to the banks’ announcements.

Results of Bank of Cyprus Public Company Ltd

Results of Cyprus Popular Bank Public Co Ltd

Link to Bank of Cyprus Public Company Ltd webpage

Link to Cyprus Popular Bank Public Co Ltd webpage

Link to the European Banking Authority webpage