Bank of Cyprus to release more deposits frozen under bailout

NICOSIA, April 30 Wed Apr 30, 2014 2:31pm EDT

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NICOSIA, April 30 (Reuters) - Cypriot lender Bank of Cyprus will release some of the 933 million euros ($1.3 billion) of deposits still frozen under a recapitalisation of the bank last year, it said on Wednesday.

It will be the second major release of deposits by the lender, which was forced to convert nearly half of uninsured deposits exceeding 100,000 euros into equity in the bank as part of an international bailout of Cyprus last year.

It was the first time in the history of the euro zone that uninsured deposits were seized to recapitalise a bank instead of passing the burden onto EU taxpayers.

A considerable portion of uninsured deposits remaining after the rest was converted into equity were placed in fixed-term deposit accounts.

The lender released 950 million euros in maturing six-month time deposits in January.

The bank said a third of nine-month time deposits would be immediately released and placed in clients' current accounts, with the remaining converted into three-and-six month time deposits which would be automatically released on maturity.

Bank of Cyprus said its action reflected its improving liquidity position and a better economic outlook.

The funds, it said, would still be subject to capital controls enforced by Cypriot authorities last year to prevent a run on the banking system. Those controls are gradually being eased.

In addition to forcing its depositors to pay for its recapitalisation, Bank of Cyprus assumed some assets of now-defunct Laiki Bank, shut down under Cyprus's 10 billion euro international bailout.

Last week international credit ratings agency Standard and Poor's raised its rating for Cyprus to 'B' from 'B-', on what it said was good progress made by the island in meeting an economic adjustment programme overseen by the EU and the IMF. ($1 = 0.7212 Euros) (Writing By Michele Kambas; Editing by Susan Fenton)

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