Deposits outflow from Cypriot systemic bank stops after gov't injection

NICOSIA, April 5 (Xinhua) -- A heavy outflow of deposits from Cyprus Cooperative Bank (CCB), a systemic lender in the eastern Mediterranean island, has stopped after an injection of 2.5 billion euros by the government, Finance Minister Harris Georgiades said on Thursday.

The rush on the bank which drained deposits by about 2 billion euros in the first three months of this year, raised concerns about a second banking crisis in five years and prompted the government to intervene.

Most of the money injected in the bank, about 2.35 billion euros, came from various bonds, including a new 20-year issue.

Georgiades said that the money injection into CCB seems to have pacified investors, and bank officials said that depositors started to return after the government move.

CCB, formerly Cooperative Central Bank, operates as the second largest lender of the Mediterranean island, whose costumers consist of mainly low and middle income workers, traders and business men.

Georgiades said the government's move will facilitate the process of finding investors to take over the state-owned lender, as it has been rid of its non-performing loan portfolio, amounting to about 6.5 billion euros.

The process to attract investors, which started with an invitation for the expression of interest in mid-March, is to be brought forward by one month and be completed by the end of April, the minister said.

Georgiades said that theoretically the injection into the bank raises the public debt, but since the amount was deposited, the net public debt would not rise.

Cyprus' sovereign debt shot to about 108 percent of its annual Gross Domestic Product of about 20 billion euros, following the island's 2013 bail-out.

But thanks to repayment which was facilitated by a brisk recovery of the economy, the debt fell again to under 100 percent of GDP at the end of last year. Enditem