The EBRD will invest up to €120 million in Bank of Cyprus, as part of a €1 billion capital raise by the country’s largest financial institution. The capital raise is subject to a clawback of up to 20 per cent by existing shareholders and certain conditions, including the passing of shareholder resolutions at a forthcoming extraordinary general meeting of Bank of Cyprus. Through this investment the EBRD is actively engaging in supporting the implementation of the ongoing restructuring plan and the stabilisation of the bank’s operations.
After years of rapid expansion following Cyprus’ accession to the European Union in 2004, Cyprus’ economy and the financial system were hit hard by the global financial crisis and the downturn in the eurozone at the end of the decade, and Bank of Cyprus was strongly affected by these events. Bank of Cyprus has now embarked on implementing a comprehensive restructuring programme aligned with the key pillars of the international €10 billion Troika support package for Cyprus.
As the largest bank in the country, Bank of Cyprus’ performance is highly correlated with economic activity in the country. The stabilisation and successful restructuring of the bank is critical for the full recovery of the country’s economy and the rest of the financial sector.
EBRD’s First Vice President Phil Bennett said: “This is our first investment in Cyprus and we are pleased that it allows us to apply our financial sector experience for the benefit of the country. Supporting the restructuring and recovery of Bank of Cyprus is critical for the economy as a whole. As an active shareholder one of our priorities will be to work towards improvements in corporate governance. This successful capital raise is a positive signal to the markets, providing investors with additional confidence.”
The EBRD’s shareholders decided at the Bank’s 2014 Annual Meeting in Warsaw to start investing in Cyprus with one of the priorities being to strengthen the financial sector, making it more robust to future shocks and improving its governance. The acquisition of a stake in Bank of Cyprus is the EBRD’s first investment in Cyprus.