Banks

Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Currencies, Equities

Scary movie sequel beckons for eurozone markets

Just as horror movies can spook fright nerds more than they expect, so political risk is sparking heightened levels of anxiety among seasoned investors. Investors caught out by Brexit and Donald Trump are making better preparations for political risk in Europe, plotting a route to the exit door if the unfolding story of French, German […]

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Currencies

Dollar rises as markets turn eyes to Opec

European bourses are mirroring a tentative Asia session as the dollar continues to be supported by better US economic data and investors turn their attention to a meeting between Opec members. Sentiment is underpinned by US index futures suggesting the S&P 500 will gain 3 points to 2,207.3 when trading gets under way later in […]

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Banks

Basel Committe fail to sign off on latest bank reform measures

Banking regulators have failed to sign off the latest package of global industry reforms, leaving a question mark hanging over bankers who complain they have faced endlessly evolving regulation since the financial crisis. Policymakers had hoped to agree the contentious new measures at a crunch meeting held in Chile this week, but a senior official […]

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Banks, Financial

Banking app targets millennials who want help budgeting

Graduate debt, rent and high living costs have made it hard for millennials to save for a house, a pension or even a holiday. For Ollie Purdue, a 23-year-old law graduate, this was reason enough to launch Loot, a banking app targeted at tech-dependent 20-somethings who want help to manage their money and avoid falling […]

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Categorized | Capital Markets, Equities

Bank of Cyprus – the noose tightens


Posted on March 31, 2013

The noose is tightening around Bank of Cyprus. The stricken island’s number one lender is being frogmarched dangerously close to the same fate as Laiki Bank, the number two. Laiki is being dismantled as part of the €10bn bailout; only its insured deposits up to €100,000 are untouched. The Cypriot central bank now says that uninsured depositors above the same threshold at Bank of Cyprus could see 60 per cent of their savings eaten up in its restructuring – far more than they were led to believe last week. The more the Cyprus crisis unfolds, the more likely it becomes that Bank of Cyprus will be devoured too.

    The bank’s uninsured depositors will get shares – with voting rights and dividends, you lucky people – in exchange for 37.5 per cent of their net deposits over €100,000. A further 22.5 per cent will be frozen and may be converted into shares later. The other 40 per cent will be unfrozen “in a short period of time”. An independent valuer will assess what Bank of Cyprus is worth for the purpose of this forced exchange. That should not be too difficult. With the island’s economy predicted to shrink by up to a quarter as the rigours of the bailout take hold – as happened in Greece – and bad loans sure to jump, the earnings outlook at Bank of Cyprus is dire. Its share price has fallen nearly 95 per cent in the past two years as Cyprus fell victim to contagion from Greece and its own calamitous policy errors. Its residual equity value has been wiped out by the rescue package.

    One ray of hope for the eventual emergence of Bank of Cyprus as a viable business comes from Ireland. Bank of Ireland escaped full nationalisation when the nation’s banks collapsed. It is now 40 per cent owned by a group of US investors, which put €1bn into its recapitalisation in 2011. Cyprus and its banks, alas, are a long way from such a moment.

    Email the Lex team in confidence at lex@ft.com