Central Bank of Cyprus

Yale University

EliScholar – A Digital Platform for Scholarly Publishing at Yale YPFS Resource Library 3-30-2013 Central Bank of Cyprus - Clarifications for the better understanding of the resolution measures implemented under the Resolution of Credit and Other Institutions Law, 2013 at the Bank of Cyprus and Laiki Bank Central Bank of Cyprus https://elischolar.library.yale.edu/ypfs-documents2/2056  This resource is brought to you for free and open access by the Yale Program on Financial Stability and EliScholar, a digital platform for scholarly publishing provided by Yale University Library. For more information, please contact ypfs@yale.edu. 9/28/23, 1:46 PM Central Bank of Cyprus - Clarifications for the better understanding of the resolution measures implemented under the Resolution of Credit and …https://www.centralbank.cy/en/announcements/30032013-1 1/3Clarifications for the better understanding ofthe resolution measures implemented under theResolution of Credit and Other InstitutionsLaw, 2013 at the Bank of Cyprus and LaikiBankSaturday, 30 March 2013For the better understanding of the resolution measures implemented under the Resolution of Credit and OtherInstitutions Law, 2013 at the Bank of Cyprus and Laiki Bank, following the agreement of the Eurogroup withthe Cyprus Government on 25 March 2013, the Central Bank of Cyprus (CBC) would like to clarify thefollowing points:1.   Laiki BankThe resolution measures already adopted are:(a) The sale of Laiki Bank’s branches in Greece to Piraeus Bank in Greece(b) The sale of Laiki Bank’s business in Cyprus (excluding the bank’s subsidiaries and branches abroad) to theBank of Cyprus.As a result of the above, all contracts are transferred to either the Bank of Cyprus or Piraeus Bank.Furthermore, all branches of Laiki Bank will resume as normal on Tuesday, 2 April 2013 together with theirstaff, but under the ownership of the Bank of Cyprus.Moreover, the following points are clarified:All insured deposits (individuals and legal entities) up to €100.000 have, as of 26 March 2013, beentransferred from Laiki Bank to the Bank of Cyprus. In addition, the entire amount of deposits belongingto financial institutions, the government, municipalities, municipal councils and other public entities,insurance companies, charities, schools, educational institutions, and deposits belonging to JCCPayment Systems Ltd have been transferred to the Bank of Cyprus.All other deposits exceeding €100.000 remain in the 'bad' Laiki Bank.All loans and credit facilities to Laiki Bank customers are transferred to the Bank of Cyprus, apart fromthe amount which is attributed to the deposits that remained in the 'bad' Laiki Bank, as mentioned above.In other words, there will be a set off between loans and deposits. 2.   Bank of CyprusThe resolution measures are:9/28/23, 1:46 PM Central Bank of Cyprus - Clarifications for the better understanding of the resolution measures implemented under the Resolution of Credit and …https://www.centralbank.cy/en/announcements/30032013-1 2/3(a) The sale of Bank of Cyprus’s branches in Greece to Piraeus Bank in Greece.(b) Adopting a bail-in rescue plan.For the purposes of the above measure, if the aggregated deposits a customer (individual or entity) heldon 26 March 2013 at the Bank of Cyprus exceed €100.000, then for the amount higher than €100.000the following apply:(a) Total loans and credit facilities of the customer on 26 March 2013 at the Bank of Cyprus are deducted fromthe deposits exceeding €100.000. If the sum of the balances of loans and credit facilities is greater than orequal to the amount of deposits exceeding €100.000, then the resolution measures are not applicable to thisclient. If the sum of the balances of loans and credit facilities is less than the deposits exceeding €100.000,then the following apply:(b) 37,5% of this difference is automatically converted into Class A’ shares of the Bank of Cyprus, with votingrights and dividends.(c) 22,5% of this difference is temporarily ‘frozen’ and possibly part or the whole of it, will be converted intoClass A’ shares of the Bank of Cyprus with voting rights and dividends for the purposes of the bank’sresolution. In that regard, an independent valuer will be appointed for the valuation purposes of the Bank ofCyprus. Not later than 90 days from the completion of the valuation, all or part of that percentage might beconverted into shares and the remainder returned to the depositor. To the extent that the 22,5% will be re-deposited, the interest will be calculated retrospectively together with a small increment.(d) The remaining 40% of the difference is temporarily ‘frozen’ for liquidity purposes. However, the interestcontinues to be calculated for this deposit based on the existing interest rate, plus an increment of 10 basispoints. This amount will be ‘unfrozen’ in a short period of time and will not be used for resolution purposes. The current capital of the Bank of Cyprus (shares, securities convertible into shares, bonds) is convertedinto new shares as explained below:The existing ordinary shares are converted into new shares of Class D'.The existing securities which are convertible into shares are converted into new shares of Class C'.Existing bonds are converted into new shares of Class B '.Voting rights and dividends for the above-mentioned new classes of shares (B’, C’, D’) may be exercised onlyif the total dividends to be given to holders of Class A’ shares reach the original contribution plus interest at anannual rate of EURIBOR-3 months plus 10%. Class A’ shares have full voting rights and dividends. As a result of these resolution measures, the Bank of Cyprus has essentially absorbed the largest part of theoperations of Laiki Bank in Cyprus and continues to provide services to the customers of both banks, throughthe branches of the Bank of Cyprus and the branches of the former Laiki Bank. Customers are encouraged to continue using the branches with which they previously conducted theirbusiness until the extended network is able to serve all customers from all points. It is important to note that the above resolution measures do not apply to the former customers of Laiki Bankand do not apply to any amounts deposited with the Bank of Cyprus, either by a client of the Bank of Cyprusor by a client of the former Laiki Bank, after 26 March 2013.9/28/23, 1:46 PM Central Bank of Cyprus - Clarifications for the better understanding of the resolution measures implemented under the Resolution of Credit and …https://www.centralbank.cy/en/announcements/30032013-1 3/3 3.   In relation to the implementation of resolution measures for Laiki Bank and the Bank of Cyprus, thefollowing principles apply:3.1. Treatment of joint accounts: According to the Regulations for the operation of the Deposit ProtectionScheme and the Resolution of Credit and Other Institutions Law, 2013, each of the joint account holders isconsidered to have a separate deposit, and hence the total deposit is divided by the number of persons who areco-owners, unless there are specific contractual terms or elements which differentiate the above.3.2. Treatment of multiple deposit accounts per customer: If a customer has more than one deposit account,then the deposit amount with respect to the measures referred to in points 1 and 2 above is considered to be thesum of all accounts up to €100.000.3.3. Deposits (a) of persons acting as trustees or nominees, (b) persons who are beneficiaries in clients’accounts: Amounts relating to the above categories, are ‘frozen’ until the presentation of appropriate evidenceto the respective banks for the beneficiaries of the account holder.3.4. Series of Conversion deposits into equity per customer at the Bank of Cyprus:In the case of multiple accounts per customer, the conversion of deposits into equity is in the following orderof priority: (a) accounts with a longer period until maturity (longest maturity date), (b) accounts with largeraccount balances.It is important to note that the relative Decrees may be modified by new Decrees issued by the resolutionauthority, if the need arises. Unofficial translation of the Sale of Certain Operations of Cyprus Popular Bank Public Co Ltd Decree of 2013Unofficial translation of the Bailing-in of Bank of Cyprus Public Company Limited Decree of 2013 

Central Bank of Cyprus - Clarifications for the better understanding of the resolution measures implemented under the Resolution of Credit and Other Institutions Law, 2013 at the Bank of Cyprus and Laiki Bank

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Central Bank of Cyprus - Clarifications for the better understanding of the resolution measures implemented under the Resolution of Credit and Other Institutions Law, 2013 at the Bank of Cyprus and Laiki Bank

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