Brussels, 06/11/2012 (Agence Europe) - On Tuesday 6 November 2012, the new bank guarantee system introduced in Cyprus to help struggling banks access medium-term loans got the go-ahead from the European Commission as being compatible with EU state aid rules because, as the Commission explained in a press release, it should ensure stability of the banking system without causing unwarranted distorsions of competition.
The guarantees cover loans taken out and bonds issued before end 2012 maturing in five years or less. Banks benefiting from the scheme will have to submit solvency plans, rein in their commercial strategies and staff pay and bonuses.
Cypriot banks are suffering from the writedown of the Greek debt earlier this year, which led Nicosia to request financial aid from the eurozone in June. After an initial fact-finding mission by the troika of lenders (the European Central Bank, International Monetary Fund and European Commission) in the summer, Simon O'Connor, a spokesman for Euro Commissioner Olli Rehn, says that the date of the next fact-finding mission is unclear. On Monday evening, a Cypriot source said that Cyprus hopes agreement on the aid conditions can be reached ahead of the 12 November Eurogroup meeting so that the ministers can endorse the deal at their meeting. (EL/transl.fl)