Embattled Bank of Cyprus pays off bailout loan

Bank of Cyprus has dragged itself out of financial ruin on the back of a number of international bailouts. [Peter Cowan/ Shutterstock]

Bank of Cyprus, the Mediterranean island’s largest lender and one of the largest casualties of the financial crisis, yesterday (5 December) announced it had paid back in full the €11.4 billion in Emergency Liquidity Assistance it received in an international bailout.

“Bank of Cyprus announces that it has today fully repaid the ELA funding it has been receiving from the Central Bank of Cyprus,” the bank said in a statement.

It said it was “another significant milestone in the journey back to strength since 2013”.

That €11.4 billion emergency aid was equivalent to over half the country’s gross domestic product.

In March 2013, Cyprus clinched a €10 billion loan from the European Union and International Monetary Fund to bail out its troubled economy and oversized banking system.

The EU should be a more active contributor to the Cyprus issue

The Cyprus issue is a longstanding problem that many believe will remain unresolved forever. Nonetheless, in recent weeks, it has been drawing the attention of the media. Takis Hadjigeorgiou and Dimitris Papadimoulis explain what is at stake.

Under the terms of the deal, the government was required to close the island’s second-largest bank, Laiki, and impose a 47.5% haircut on deposits above €100,000 at Bank of Cyprus.

That decision was at the heart of a European Court of Justice case last year, where disgruntled investors took the so-called troika (European Commission, International Monetary Fund and European Central Bank) to court.

The Luxembourg judges dismissed the case but ruled that anyone who could prove that their fundamental rights had been infringed by austerity policies could sue the tripartite committee.

Austerity-hit citizens allowed to sue troika, ECJ rules

The European Court of Justice has ruled that EU citizens can now sue the troika if they believe their fundamental rights have been violated by austerity. EURACTIV Germany reports.

The bank has since undergone major restructuring, which included absorbing the good assets of the former Laiki Bank and selling assets.

The full repayment of the ELA “should further strengthen stakeholders’ confidence that the bank is becoming a stronger, safer and a more focused institution capable of delivering appropriate shareholder returns over the medium term,” bank CEO John Patrick Hourican said.

The bank, which is applying for a listing on the London Stock Exchange, intends to maintain a listing on the Cyprus Stock Exchange but will no longer be listed on the Athens Exchange. It hopes to become eligible for inclusion in the FTSE UK Index series.

However, the bank is still not out of troubled water, as about 45% of its loans suffer from late or lack of repayment, one of the poorest delinquency rates in Europe.

Subscribe to our newsletters