Bank of Cyprus completes recapitalization with deposits haircut

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Cypriot authorities on Tuesday announced the Bank of Cyprus had been fully recapitalized by converting 47.5 percent of uninsured deposits into shares in the bank, as part of the eastern Mediterranean island's 10 billion euros (13.2 billion U.S. dollars) bailout.

A joint statement by the ministry of finance and the Central Bank of Cyprus said the final conversion of deposits into bank equity was putting an end to a period of uncertainty.

Cypriot authorities initially converted 37.5 percent of deposits of over 100,000 euros into equity, with a further 22.5 percent earmarked as a buffer if further recapitalization was needed.

However, fears that the haircut on deposits would reach 60 percent did not materialize.

The unprecedented decision to rescue the faltering Cypriot banking system by a bail-in, that is using depositors' money, was reached at a Eurogroup meeting on March 25.

The Cypriot statement said the recapitalisation ensures that the Bank of Cyprus well exceeds its minimum capital adequacy ratio. Following the recapitalisation, 12.5 percent of uninsured deposits that were previously blocked will be released.

Officials expressed confidence that the bank's exit from resolution will enable it to provide liquidity for the restarting of the economy.

"It will underpin its resilience and ability to support the Cyprus economy and thus assist in stabilizing the financial sector in Cyprus," the statement said.