Nov. 6 (Bloomberg) -- Cyprus won European Union approval to grant banks a state guarantee for medium-term funding until the end of the year.
The European Commission said in an e-mailed statement the guarantees will cover new loans and bonds issued before Dec. 31 with a maturity for as long as five years.
Banks based in Cyprus, including units of foreign banks, must offer remuneration and eligible collateral in return for the guarantees and may face limits on expansion, marketing and bonus payments, the commission said today.
The two largest Cypriot lenders, Bank of Cyprus Pcl and Cyprus Popular Bank Pcl, failed to meet capital targets, the European Banking Authority said last month. The Central Bank of Cyprus put their combined shortfall at 1.86 billion euros ($2.4 billion) as of June 30.
Cyprus on June 25 became the fifth country in the euro area to seek external aid. No amount was specified for the rescue, which will encompass the public sector as well as banks. Cyprus has also sought a 5 billion-euro loan from Russia.
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