Brussels, 25/07/2013 (Agence Europe) - The Cypriot government is expecting to receive a positive preliminary assessment by the troika of lenders (European Commission, European Central Bank and International Monetary Fund) before the weekend. A Cypriot source said that the government had asked the troika fact-finding mission that has been on the island for ten days, to submit the assessment report before the weekend. A source at the Cypriot Finance Ministry said: “I think the draft report will be out by Monday. During the weekend, I believe intense discussions will take place”. The first source expected the lenders to respond favourably, hoping for a better-than-expected budget situation for the first six months of 2013. Asked about this, the European Commission said it could not comment on the drafting of the report.
According to the first source, Cyprus' lenders are still awaiting the final version of the KPMG report on Cyprus' banks. The Finance Ministry source said they were expecting one report on the good Laiki, one report on the bad Laiki (bank), that has now folded, and one report on the Bank of Cyprus (BoC). Both sources said that dividing BoC into two separate banks had been temporarily put on ice (see EUROPE 10893). The Finance Ministry source commented: “Splitting BoC into two is actually temporarily frozen after the political reactions. Maybe the new board will take decisions”. The same source told this newsletter that the chair of BoC's board says “he believes the haircut will be around 50%” for unsecured deposits of more than €100,000 (that will be raided and converted into top quality bank capital). Two other Cypriot sources said earlier this week that they, too, thought the haircut would be to the order of 50% (see EUROPE 10893). Representatives of the Cypriot chambers of commerce and industry have told the troika that it is crucial for confidence to be restored in the Cypriot banking system. The raiding of bank deposits was accompanied in March by restrictions on the movement of capital that were supposed to last for four days. The restrictions are still in place, although they have gradually been eased. (EL/transl.fl)