Cyprus says bank results could expedite end of capital controls (updated)

Hellenic Bank Pcl

26/10/2014 15:36

(Adds quotes, detail) 
    NICOSIA, Oct 26 (Reuters) - Results of stress tests on 
Cyprus's banking sector have shown a re-establishment of 
stability in the banking sector, and could expedite the complete 
lifting of capital controls, Finance Minister Harris Georgiades 
said. 
    "It won't be tomorrow but we shall commence the process of 
lifting the very last restrictions soon, in a gradual and staged 
 manner," Georgiades told Reuters. 
    Cyprus imposed capital restrictions to prevent a bank 
deposit flight in 2013 at the height of a tumultuous bailout 
from the European Union and International Monetary Fund. 
Domestic restrictions have been dismantled, but large capital 
transactions abroad still have to be vetted. 
    Tests on three Cypriot banks on Sunday showed only one, 
Hellenic Bank  HBNK.CY , requiring 105 million euros in 
additional capital under an adverse scenario. Two others, Bank 
of Cyprus  BOC.CY  and the Co-Op, although showing shortfalls 
last year, have addressed those issues in the meantime. 
    Georgiades said the fact the stress tests showed that a 1 
billion euro buffer was unnecessary for the financial sector 
materially pushed down projections of public debt.  
    The buffer was included specifically for Co-Op Bank, which 
received a 1.5 billion euro cash injection this year out of a 10 
billion euro bailout package agreed with international lenders 
in March 2013. 
    "It will now be below 105 percent, much closer to 103 
percent," Georgiades said, referring to 2015. 
    "This represents a major change of circumstances... And 
obviously one which makes the target of going below the symbolic 
threshold of 100 percent perfectly feasible before 2017." 
    The EU and the IMF had forecast a public debt of 126 percent 
of gross domestic product for the island nation in 2015, 
factoring in the 1 billion euro buffer. 
 
 (Reporting by Michele Kambas; Editing by Robin Pomeroy and 
David Evans) 
 ((michele.kambas@thomsonreuters.com;)) 
 
Keywords: EU BANKS/CYPRUS MINISTER