Cyprus Prepared to Support Banks If Needed, Orphanides Says

The Central Bank of Cyprus is prepared to support Cypriot banks hurt by Greek debt writedowns, central bank Governor Athanasios Orphanides said.

“The central bank in cooperation with the finance minister has elaborated a plan to support banks so that in case a bank should need support, the state will be ready to provide assistance,” Orphanides, who is also member of the European Central Bank’s governing council, told reporters in Nicosia today. “The central bank has full faith in the banking system and there is no reason for scaremongering or concern.”

Recapitalization plans submitted to the central bank by Bank of Cyprus, the island’s largest lender, and Marfin Popular Bank, the second biggest, were examined and considered “satisfactory,” Orphanides said. Bank of Cyprus will need 400 million euros ($536 million) and Marfin 1.35 billion euros to bring their Core 1 capital ratio to 9 percent, he added.

The profitability of Cypriot banks “was better compared to what was expected,” Orphanides said. Bank of Cyprus and Marfin posted losses of 1 billion euros and 3.3 billion euros respectively for 2011. Hellenic Bank, the third-largest lender, had a loss of 100 million euros.

Finance Minister Kikis Kazamias said that while the financial situation of Cypriot banks “is manageable,” lenders should implement their recapitalization plans by “exhausting all opportunities available to raise required capital from the private sector.”

The banks should start first with their existing shareholders and then try to attract new investors, he said.

To contact the reporter on this story: Stelios Orphanides in Nicosia at sorphanides@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net