The Central Bank of Cyprus has asked the European Central Bank for additional emergency funding for its banks of up to 3 billion euros, German newspaper Die Welt reported on Tuesday, citing sources with knowledge of the situation.
Cyprus's banks were ordered to remain closed until Thursday after the country negotiated a rescue plan with international lenders in which it agreed to shut down its second-largest bank, Cyprus Popular Bank, and inflict heavy losses on big depositors.
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When banks eventually reopen after a shutdown that began over a week ago, Cyprus plans to impose capital controls to prevent big outflows of cash.
Die Welt said the additional 2.5 to 3 billion euros in Emergency Liquidity Assistance (ELA) were not for the country's largest commercial lenders, Bank of Cyprus and Cyprus Popular Bank, but for the remaining, smaller banks.
The island's bloated financial sector is heavily dependent on such ELA funding, which needs approval from the ECB, after Cyprus sovereign bonds became ineligible for use as collateral for ECB refinancing operations due to their low credit ratings.
At the end of January, Cypriot lenders had taken around 9.1 billion euros from the country's central bank through ELA, the Central Bank of Cyprus balance sheet showed.
The Central Bank of Cyprus, which provides the emergency loans, had asked the ECB for approval on Monday, the paper said.
The ECB said in a statement on Monday it "decided not to object to the request for provision of Emergency Liquidity Assistance by the Central Bank of Cyprus, in accordance with the prevailing rules", but without giving any detail of the request.
The ECB declined to comment on the report.
(Reporting by Eva Kuehnen; Editing by Hugh Lawson)