The Cypriot government gave assurances on Tuesday that the Bank of Cyprus (BoC) will not be wound down, after several hundred bank employees demonstrated in protest at the appointment of an administrator to run the bank.
The bank employees demonstrate outside the headquarters of Bank of Cyprus, calling for the resignation of its governor in the capital Nicosia, Cyprus, March 26, 2013. The Cypriot government gave assurances on Tuesday that the Bank of Cyprus (BoC) will not be wound down, after several hundred bank employees demonstrated in protest at the appointment of an administrator to run the bank.
The demonstrators gathered outside the headquarters of the BoC and then marched to the nearby Central Bank building, calling for the resignation of its governor Panicos Demetriades.
Government spokesman Christos Stylianides said the appointment of an administrator was meant to facilitate the restructuring of the BoC and could be very short, perhaps until banks reopen on Thursday.
He said the BoC was quite different from that of the Cyprus Popular Bank (Laiki), which will be resolved and its good part merged with the BoC under the provisions of a Eurogroup bailout deal for Cyprus.
A Central Bank statement clarified that it appointed an administrator at the bank and not a receiver. The administrator’s mission is to take over the running of the BoC and not its resolution, which would be a receiver’s job. It explained that the administrator at both the Bank of Cyprus and Laiki will help conclude their consolidation and restructuring.
As far as the BoC is concerned the administrator’s mission is mostly to see through its recapitalization, the statement said.
Bank of Cyprus CEO Andreas Artemis earlier on Tuesday sent a letter of resignation to the bank’s Board, expressing his disagreement both with the merger and the takeover of the Greek part of the operations by the Bank of Piraeus.
However, the Greek takeover was concluded a short while later under a bailout condition that all three Cypriot banks spin off their operations in Greece, where they had about 300 branches and accounted for between 8 and 10 percent of Greek banking transactions.
The Greek branches are set to reopen on Wednesday after a 10-day bank holiday designed to prevent a run on deposits, but banks in Cyprus will stay closed a day longer until Thursday.
Laiki will be split into a good part which will take with it insured deposits of up to 100,000 euros (129,000 U.S. dollars) and other assets into the BoC, along with a 9.2-billion-euro emergency liquidity assistance debt.
To offset liquidity difficulties, the European Central Bank promised to continue liquidity support to the BoC within the appropriate arrangements. Uninsured BoC depositors and shareholders will be force to take a loss estimated by the finance minister to be up to 40 percent.
The government spokesman, who had earlier set the loss will be around 30 percent, said the size of the loss will only be known when the Central Bank, the ministry of finance and the troika conclude a survey of the BoC.
The bad part of Laiki will ultimately be resolved, with uninsured deposits and shares taking the loss.
The Central Bank will impose restrictions on transactions when the banks reopen but little is known yet about their nature.
President Nicos Anastasiades has said they will be of a very temporary nature and Finance Minister Michael Sarris said they will last only a few weeks.
Withdrawal of cash through teller machines is continuing but limited at 100 euros per day and the BoC has restored electronic transactions.
In an expression of popular resentment at the conditions going with the 10-billion-euro bailout the Eurogroup agreed for Cyprus, about 3,000 students left their classrooms on Tuesday and gathered outside parliament to vent their anger.
A parliamentary committee was in session at the time hearing evidence about mismanagement at Laiki over the last 18 months.
A bank official told the committee the bank had received 300 million euros in emergency bank liquidity by September, 2011, but the sum went up to 3.5 billion by the end of the year. Liquidity support shot up to 8 billion euros by June, 2011, when parliament approved an emergency state support of 1.8 billion euros to the bank.
Giving this amount to Laiki forced Cyprus to seek EU/IMF bailout support a few days later.
The student demonstration outside parliament was the first massive popular protest up to now, as Cyprus has not experienced yet the kind of violent mass protests other bailout euro countries have gone through.