The Association of Cyprus Banks (ACB) has expressed satisfaction with the positive results of the Comprehensive Assessment of four Cypriot banks by the European Central Bank and the European Banking Authority.
ACB notes in a press release that the completion of the exercise strengthens the efforts made both at home and European level to achieve transparency, consolidating stability and building confidence in the financial system and the banking sector across Europe.
According to the Association, the results of the Comprehensive Assessment, especially for Cyprus,
show that “our banks have responded positively to the strict quality control requirements of the assets and exercise stress test and that is in a position to cope with future risks that might arise from a possible rapid deterioration of economic data.”
It also indicates that “actions taken by our banks over the past months led to a significant increase in capital, thus enhancing the resilience of the banking sector, as it is also confirmed by the analysis of the results.”
The Association believes that these positive developments enhance the international credibility and the public’s confidence in the Cypriot banking system, which are essential to the overall effort for recovery and growth of our economy.
The Bank of Cyprus, which emerged with a capital surplus, said the pre-emptive increase in capital by €1 billion capital raise ensured that the Bank of Cyprus absorbed the capital shortfall that emerged from the ECB comprehensive assessment.
Stress test revealed a capital shortfall amounting to €919 million in the adverse scenario. The gap was covered by the €1 billion capital raise resulting in an overall surplus of €81 million.
“The positive result of the Comprehensive Assessment reaffirms the solid capital position of the Bank, even under the most extreme, severe theoretical stress conditions. It also reflects the pro- activeness of the Group in raising adequate capital in advance of the Comprehensive Assessment,” BoC Board of Directors Chairman Cristis Hassapis said.
He added that the result “is another milestone for the Bank and will further strengthen the confidence of depositors and other stakeholders towards the Bank.”
“A stronger Bank will be better positioned to support the economic recovery in Cyprus, leading to increased prosperity in the country,” he concluded.
CEO John Patrick Hourican said that “the well – timed and deliberate actions taken during 2014, and in particular the pre-emptive €1b share capital increase, have ensured a positive result in the ECB’s Comprehensive Assessment.”
“The share capital increase has generated a significant capital buffer, ensuring that the Bank could weather even the adverse stress scenario envisaged by the authorities,” he stressed.
The Co-operative Central Bank also welcomed the outcome of the stress tests, which revealed a capital surplus of €331m under the adverse scenario.
It said it would continue “the methodical work to enhance the traditional role of the Co-ops in the Cypriot society and economy”, based on these results.
It said that the baseline scenario of the stress tests revealed a capital surplus of €526 m and the adverse scenario €331 m.
The Cooperative sector was nationalised as the government injected €1.5 billion from the bailout funds to cover its capital needs.
For its part the Hellenic Bank said the results of the Comprehensive Assessment, which resulted in a residual capital requirement of €105 million, were in line with the capital plan of the Bank.
“The Bank is already at an advanced stage of raising capital through a rights issue, for an amount which will exceed the Comprehensive Assessment outcome” it said.
For the Hellenic Bank, “the €277m result from the `adverse scenario’ is reduced by mitigating factors to €105m, that will be covered though our forthcoming rights issue. The Hellenic Bank will raise more capital than the residual capital resulting from the Comprehensive Assessment in order to actively support the recovery of the Cyprus economy” the press release noted.
Irena Georgiadou, Chairwoman of the Hellenic Bank, said that “the Comprehensive Assessment results in a residual capital need of €105 million under the adverse scenario for Hellenic Bank, which is fully in line with our capital raising actions. Our planned rights issue will raise significantly more than the residual Comprehensive Assessment calculation, and this will allow us to pursue our ambitious strategic growth plans to gain market share and utilise our large liquidity buffer. Our major shareholders support these growth plans as well as the raising of capital.”