Cypriot Bank Losses From Greek Bond Swap "Manageable"

Losses incurred by Cypriot banks from a Greek debt restructuring are “manageable” and Cyprus is ready to support its lenders, if needed, European Central Bank governing council member Athanassios Orphanides said Thursday.
Orphanides, who is also the governor of the Central Bank of Cyprus, said plans prepared by local lenders to boost their capital have been approved and the central bank is keeping an eye on their implementation.
“I remind you that the government is committed, based on the October 26th European Union summit decision, to support the banking system if needed,” he said, according to transcript of his remarks received in Athens.
The European Banking Authority estimates that Cypriot lenders, heavily exposed to Greece’s sovereign debt woes, will need to raise 3.5 billion euros by the middle of the year to meet new capital adequacy ratios.
Of the island’s two major lenders, the Bank of Cyprus PCL (BOCY.CP) has said it needs roughly 1.5 billion euros to close that gap and has already made some moves to raise fresh capital. Cyprus Popular Bank PCL (CPB.CP), previously known as Marfin Popular, needs roughly 2 billion euros in additional funds.
Although the sums are relatively small, compared with losses faced by their counterparts in Greece, there are concerns that moves by the government to support banks will further weigh on Cyprus’ public finances, which are already reeling from the effects of sharp economic slowdown following a deadly munitions blast last summer that crippled power production.
As a means of helping boost the economy, Orphanides called on the government to push ahead with belt-tightening measures, structural reforms and a bank-recapitalization plan.
“In this way, Cyprus will be able to fight unemployment and return to a viable growth path with full employment,” he said.
(source: DowJones)