According to reports, Ross told President Anastasiades that he will not invest nearly half a million in the bank before the bill has been passed by the House, although senior bank executives have not commented.

Ross’ demand is found to be justified by financiers and bankers as the investor is aware that the €1 billion from the increase of capital will not be used to boost the local economy but will go straight to the European Central Bank to cover the bank’s obligations to the Emergency Liquidity Assistance (ELA).

BoC owes approximately €9 billion to the ELA, which was inherited when the bank took over the operations of defunct Laiki Bank in last year’s bailout/bail-in saga.


Another €950 million, which the state received about two months ago from the international market and was given to BoC for supporting Laiki with €1.8 billion in 2012, also went towards paying off the ELA debt.


BoC is expected to collect an additional €3 billion by autumn from issuing bonds and the amount will also go towards reducing the remaining €6 billion total with the ELA, cutting the burden of its debt from 3.5 times the bank’s capital to 1.5.


The reduction of the debt towards the ELA is expected to increase the trust of both investors and depositors and help the bank get back on track.


In an attempt to ensure that his investment will flourish, Ross has asked the president for assurances that the repossessions bill will be passed by the House, as all the bank’s income will be directed towards the ELA. 


Senior bank board sources said that the decision to give all funds to the ELA was not made by the board of directors and that the board heard about it by executive bank staff through the local and foreign media.


Provided that the investment goes through, Ross will hold 19% of BoC’s shares and will have almost complete control over the bank through a position he is expected to take on the board.

Meanwhile, a newsletter released by the Bank of Cyprus regarding the capital increase, said there is a direct relation between the bank’s recovery and the draft bill on repossessions. It mentioned that the bank’s progress, as it is outlined by the administration and management, is based to a large extent on restructuring the legislative framework on repossessions and house auctions.


It is also stressed that the bill is a bailout obligation and a prerequisite set by the Troika for the disbursement of the next instalment of bailout cash, therefore the government has an obligation to pass it regardless of developments at BoC.

Source: InCyprus