Cyprus Popular Bank Public Co Ltd (Cyprus Popular Bank) notes the announcements made today by the European Banking Authority (ΕΒΑ) and the Central Bank of Cyprus regarding the final assessment of the capital exercise and fulfilment of the EBA December Recommendation, which demonstrate the following result for Cyprus Popular Bank.

Cyprus Popular Bank has a remaining capital shortfall of €1.125 m as of 30 June 2012, which is being addressed through the implementation of the corresponding backstops with the explicit support of the Cyprus Government.  This is the amount required by Cyprus Popular Bank to reach a Core Tier 1 capital ratio of 9% required by EBA from the current ratio of 4,4% as at 30 June 2012.  The Tier 1 ratio of Cyprus Popular Bank stood at 6,8% as at 30 June 2012.

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 October 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 on 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 maintain 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, four 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 61banks.