Sunday mail newspaper

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SUMMER SCHOOL INSIDE

Widespread praise for Angelina Jolie in wake of mastectomy

A few ideas for what to do with the kids over the long hot summer

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Pages 17-20

TV and lifestyle supplements to see you through the week

www.cyprus-mail.com

May 19, 2013

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COFFEESHOP: HALLELUJAH! THE CYPROB IS BACK IN TOWN INSIDE Cyprus New hope for Nicosia’s popular Turkish baths 7

World Hollande signs gay marriage law 8

Business Troika pill is the only cure 22

Property Change technology for creativity in kids’ rooms 23

Sport Retiring Ferguson seeks anything but a quiet life back

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Further raid on BoC is possible Current state of administration needs to end so bank can run its own affairs By Elias Hazou

T

HE Bank of Cyprus, touted pillar of the economy, may yet stay afloat - but at what cost? If the lender’s consolidated balance sheet - released this week - is anything to go by, it’s likely going to take many more billions to recapitalise the bank to a degree that’s satisfactory to regulators. And given that for the moment a raid on deposits or ‘bail-in’ is virtually the bank’s only way to raise capital, big savers can expect a much larger haircut. A crew cut, more like it, say some. It’s plausible that the haircut on uninsured deposits - so far 37.5 per cent - could shoot up to 60 per cent, speculates one leading economist. “The bank’s capital needs will depend on several things, but a key factor will be the clients’ - businesses as well as households - progressive difficulty in repaying loans. Another is the falling price of real estate held as collateral,” said Simeon Matsis, who was a member of the BoC’s previous board of directors. Hardly anyone disputes that the bank’s non-performing loans are bound for an upward trajectory in the midst of a protracted economic slump. And the lender’s consolidated balance sheet, though provisional, appears to bear out these concerns. The posting of the bank’s numbers on Thursday was a small stride forward in the long path towards the bank’s normalisation. Up until then,

the main problem delaying the lender’s restructuring had been the regulator’s failure to confirm the balance sheet of Laiki so the Bank of Cyprus would know what it would be getting in terms of assets and liabilities. Determining the final haircut, the conversion of deposits to equity, and thus the new shareholder base of BoC is a key step towards returning the lender to normalcy. According to the BoC consolidated balance sheet which factored in the 37.5 per cent haircut on uninsured deposits and also the absorbing of Laiki’s assets and liabilities - the bank boasts a core tier 1 capital ratio of 13 per cent well above the 9 per cent safety net stipulated by the Basel III accounting rules. Why did the Central Bank overreach the capital adequacy target by four percentage points? Even the memorandum of understanding with the troika of April 2013 called for the conventional 9 per cent buffer for tier 1 capital. But the same document went on to say that “...if required, an additional conversion of uninsured deposits into class A shares will be undertaken to ensure that the core tier one target of 9 per cent under stress by endprogramme can be met.” “Under stress” being the operative phrase here. It’s a safe bet that both the troika and Central Bank assume the BoC’s capital adequacy will drop by the time the dust settles. And by the dust settling one means how much equity the bank will be left with after

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A visitor sits on the Iron Throne from the epic Game of Thrones series during an exhibition on the US fantasy series at the Posthoornkerk in Amsterdam. The exhibition includes weapons, costumes and props from the series (EPA)

EU finds time for olive oil regulations CRITICS ridiculed European Union bureaucrats yesterday for taking time off fighting the euro zone’s debt crisis to impose strict new rules on how restaurants serve olive oil. From January 1, 2014, eateries will be banned from serving oil to diners in small glass jugs or dipping bowls, and forced instead to use pre-sealed, non-refillable bottles that must be disposed of when empty. The European Commission said the move is designed to improve hygiene and reassure consumers the olive oil in restaurants has not been diluted with an inferior product. But critics say the rules are a sop to Europe’s olive oil producers, and will only add to the

frustration felt by many towards a bloated EU bureaucracy regarded as out of touch with the concerns of ordinary Europeans. The Commission said its proposal was supported by 15 out of 27 EU member governments, including main olive oil producers Italy, Greece, Spain and Portugal - also among the countries worst affected by the euro crisis. Marina Yannakoudakis, a British MEP said the Commission’s defence of the plans highlighted how out of touch their priorities were. “The economic crisis in these countries isn’t because of olive oil, it’s because of the euro, and they should be concentrating on solving that problem,” she said.


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