The Central Bank of Cyprus hired Alvarez & Marsal Inc. to lead a probe into the circumstances that led two of the nation’s banks to seek state support.
“The investigation will provide clarity and comprehension regarding the current financial stress in the republic and guide remediation to strengthen the stability of the banking sector,” the Nicosia-based central bank said in a statement today.
Alvarez & Marsal, a U.S.-based restructuring company, managed Lehman Brothers Holdings Inc.’s operations during bankruptcy, and is designing a so-called bad bank for the Spanish government that will buy lenders’ most-toxic assets.
On June 25, Cyprus became the fifth of the euro area’s 17 member states to seek an international bailout, after Cyprus Popular Bank Pcl, the country’s second-largest, sought government backing for a 1.8 billion-euro ($2.3 billion) right offering. Two days later, Bank of Cyprus Pcl, the country’s biggest lender, sought 500 million euros of government aid.
“This investigation is necessary given the failure of the two systemically important banks that forced them to ask for state support,” Michael Olympios, chairman of the Cypriot Investors’ Association, which has 2,500 members, said by telephone today.
The central bank’s announcement came after former Finance Minister Michael Sarris resigned as chairman of Cyprus Popular on Aug. 9. Andreas Eliades stepped down as chief executive officer of Bank of Cyprus in July.