Cyprus to receive EUR 1 bln from IMF

Banca Transilvania expressed its interest in taking over the operations of Bank of Cyprus in Romania.

Cyprus and the International Monetary Fund reached an agreement Wednesday for a EUR 1 billion (USD 1.28 billion) lifeline that will supplement EUR 9 billion in aid the island will get from its euro-zone partners, informs.

Also Wednesday, Cyprus’s central bank unfroze 10% of deposits over EUR 100,000 at Bank of Cyprus PCL to allow business and individuals access to some of their savings, moving to gradually ease controls put in place to stem capital flight during the island’s banking crisis.The IMF said its executive board will be asked to sign off on the assistance in early May.In return, Cyprus will have to push cuts and savings worth 4.5 pc of annual economic output by 2018, on top of cuts worth 5 pc of GDP through to 2015. An extra 2 pc of GDP in savings will come from an increase in the country’s corporate tax from 10 pc to 12.5 pc and a hike on interest-income tax from 15 pc to 30 pc. The IMF’s statement, quoting its managing director Christine Lagarde, said the Cypriot program was “challenging.” The IMF said the reform programme would also lead to changes to banking supervision and transparency, as BBC informs.

The IMF said that the international rescue effort, which also involves the European Union (EU) and the European Central Bank (ECB), would be “well paced”.In a race against time, banking authorities in Romania and Cyprus are trying to find a solution for the takeover of Bank of Cyprus Romania, which announced early Monday that it will suspend its operations for a week. Banca Transilvania expressed its interest in taking over the operations of Bank of Cyprus in Romania, filing a non-committal bid in the process that Cypriot authorities have started in order to find a buyer, banking sources quoted by are saying.

The relationship between the Bank of Cyprus and Banca Transilvania is very close considering that for the last three years the Cypriot bank has owned 9.8 per cent of the Cluj-based bank’s shares. Likewise, Banca Transilvania has a branch in Cyprus. Whoever takes over the operations has to assume the payment of deposits and to take over the credit portfolio. According to the latest data, Bank of Cyprus Romania had deposits of EUR 245 M and credits of EUR 570 M at the end of September.

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