Cyprus deposits 2.5 bln euros in state-owned bank to counter rumors

NICOSIA, April 3 (Xinhua) -- The Cypriot government made a deposit of 2.5 billion euros (3.07 billion U.S. dollars) at the state-owned Cyprus Cooperative Bank (CCB) to help boost the lender, and counter rumors it was on the verge of collapse, the ministry of finance said on Tuesday in a statement.

The ministry said the deposit was preceded by the issue of government bonds to the bank worth 2.35 billion euros, to mature between 15 and 20 years under market terms and a right to repay the bond earlier.

Government spokesman Prodromos Prodromou said the move was intended to arm the bank and dispel the doubts and uncertainty about the lender caused by irresponsible rumors.

Reports claimed that there has been an outflow of cash of up to two billion euros from the bank over the last three months as a result of rumors spread by word-of-mouth and text messages that deposits would be impaired to recapitalize the lender.

Deposits in Cypriot banks were impaired in 2013 to recapitalize them in the world's first bail-in under the direction of international lenders.

The Eurogroup and the International Monetary Fund bailed out Cyprus in March 2013 by offering a 10-billion-euro package of economic assistance, which also involved the resolution of the banking system.

CCB became a state-owned lender after the government pumped 1.7 billion euros into it in 2014, in a move to save depositors' money.

CCB, formerly Cooperative Central Bank, was originally owned by thousands of depositors, each of whom held a small amount of shares.

"With the deposit by the Republic of Cyprus, existing deposits at the CCB...are fully secured against any theoretical danger," the finance ministry said in the statement.

It added that as collateral for the deposit, the government has acquired the entire portfolio of non-performing loans, a number of CCB shares in private cooperative societies and immovable property.

"The total value of securities amounts to 7.6 billion euros and comes up to 10 billion euros if the value of immovable properties which secure non-performing loans is taken into consideration," the ministry statement said.

The government spokesman said the move will facilitate the process of attracting investors to acquire either the lender as an entity, or part of its assets. Enditem