"For the government the issue of capital increases by commercial banks is a matter of strategic importance to the Cypriot economy," government spokesman
He was referring to a row between the BoC's board of directors and executive management, festering for months but surfacing on Friday, over how and when the lender should proceed to issuing new capital.
Despite repeated winks and nudges from Finance Minister
She reportedly decided to address a letter to the board, warning members that if stalling tactics are not abandoned, heads may have to roll.
On Sunday Archbishop Chrysostomos weighed in on the top-level conflict at the BoC. The archbishopric is one of the parties that took a hit following the forced conversion of uninsured deposits to equity and is keen on seeing the bank standing on its feet again.
"I observe two camps, each aiming at controlling the
To this end, he said, he would arrange various meetings over the next few days, including with the BoC's board and Georghadji.
"I might even need to bother the president," the Archbishop said. "Our country has suffered enough. Many have lost their life savings in the banks and there is no need for further contraction. We don't need to destroy the country," he added.
But for all his good intentions, Chrysostomos was unable to offer any solutions bridging the fundamental gaps separating the two sides. While acknowledging the need for a capital issue by the lender, he also set out restraining conditions that lie at the heart of the conflict.
"If some think we will sell the bank for peanuts, or that some funds will step in and buy the bank cheap, I think they should not be allowed to," he said.
It is understood that some board members, who represent unwilling depositors-turned-shareholders following a bail-in on uninsured deposits in
But time, the government and Georghadji counter, is a scarce commodity at this juncture. The BoC needs to build a capital buffer so that it can withstand imminent shocks, as well as in preparation for the upcoming EU-wide stress tests this fall.
Following partial repayment of a €1.8 billion government bailout bond issued in favour of now-defunct
But the bank is plagued by a potential time bomb with regard to non-performing loans that might need to be written off as losses. These comprise roughly half its total loan portfolio and the bank has been having a hard time curbing their rise, posing a significant risk as any loss provisions on these loans will be made against its available capital reserves.
Secondly, the government and Georghadji desperately need the bank to start resuming its role in the economy – extending loans and other credit. The country's largest lender has been unable to play this role since its major depositors were bailed in to help recapitalise it, to the hindrance of the whole economy. Any serious attempt at economic recovery necessarily involves enhancing the bank's liquidity buffers through the injection of fresh capital.
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