The Cyprus Ministry of Finance and the Central Bank of Cyprus have announced that the Bank of Cyprus (BoC) has been fully recapitalised by the overall conversion of 47.5% of uninsured deposits held at the bank into equity, putting an end to a period of uncertainty. This is the final stage of BoC’s resolution process and there will be no further measures under the Resolution Law.

The recapitalisation ensures that BoC comfortably exceeds its minimum capital adequacy ratio requirements. Based on the latest financial information, BoC’s Common Equity Tier 1 ratio is estimated to stand at around 12%.

As a result, BoC is no longer in resolution and the duties of the Board of Directors will now be carried out by an interim Board of Directors until the bank holds its Annual General Meeting, which is scheduled for the first half of September, 2013.

Following the recapitalisation, 5% of the total deposits is released (this, together with 10% of the total which was previously available, means 15% of the total deposits have now been released).

The remaining 37.5% of existing deposits will be split equally into three separate fixed-term deposits, with maturity periods of six, nine and twelve months, respectively. BoC will have the option to renew the fixed-term deposits once for the same durations. These deposits will receive an interest rate that will be higher than the corresponding market rates offered by BoC.  This higher rate is still to be announced. Depositors will be able to use funds from these time deposits on a one-off basis, either to repay obligations previously agreed with BoC (e.g. loans, overdrafts, credit card balances), or to split them into two or more fixed-term deposits.

The share structure of BoC will be amended so that all shareholders hold ordinary shares. The new structure will be compliant with the European Capital Requirements Regulation.

Legacy Laiki depositors will be compensated through shares in the BoC, amounting to around 18% of share capital in the combined group