Published November 30, 2012
NICOSIA – Cyprus has made preliminary plans to take up to 10 billion euros from international creditors to recapitalize the island's struggling banks, its central bank governor said on Friday.
Cyprus is now awaiting an interim report from consultants on the capital needs of its banking sector, expected by December 7 - one part of a bailout that analysts believe could total as much as 17.5 billion euros.
Asked what had been tentatively established as a recapitalization amount for the banks in a preliminary agreement with the European Union and International Monetary Fund, Governor Panicos Demetriades told journalists: "Nobody actually knows for sure."
"A figure has been put on the draft MOU ... we can say up to 10 billion euros," he added.
The figure is understood to be a rough working assumption pending data to be supplied by Pimco, consultants recruited to assess the island's banking sector.
It includes 1.8 billion euros the state has already provided to the island's second largest lender Cyprus Popular Bank, which was badly burned by Greece's debt write-down earlier this year.
Cyprus, the euro zone's smallest economy after Malta, sought aid from the IMF and its European Union partners in June. Cypriot authorities say they have concluded a preliminary agreement with lenders, which may be put for approval to euro zone finance ministers at a meeting in mid-December.
In a report this week, credit ratings agency Moody's said it estimated the cost of recapitalizing the island's three largest bank to a 10 percent Core Tier 1 would exceed 8 billion - equivalent to around 47 percent of Cyprus's entire economy.
(Reporting by Michele Kambas; Editing by Catherine Evans)