(Adds bank board meeting July 4)
NICOSIA, July 2 Cyprus's central bank has
demanded that privately held Bank of Cyprus finalise
plans this week to raise at least 1 billion euros in a capital
issue, media reported on Wednesday.
Central Bank Governor Chrystalla Georghadji, in a letter
published in the Simerini newspaper, gave the bank a three-day
deadline to affirm its plans for the completion of a capital
issue by Aug. 8.
The bank, which used depositors money to recapitalise last
year, said its board would convene on Friday to discuss "the
possibility of a capital increase". It gave no further details
in an announcement issued via the island's stock exchange.
Regulators in Cyprus are keen for the bank to bolster its
capital buffers, seen as a requirement under a 10 billion euro
bailout accord Cyprus penned with international lenders last
year, staving off bankruptcy.
Bank of Cyprus said last week that it was examining its
funding options but did not go into detail.
There has been widespread speculation about friction on the
board over the timing and conditions of any issue, particularly
how it could affect existing shareholders.
Several wealthy Russians became stakeholders in the lender
when their deposits were turned into equity, a process known as
a 'bail-in' and a condition of the international rescue package
Cyprus received in March 2013.
In her letter, Georghadji said the maximum limit of a
clawback to existing shareholders should not exceed 20 percent.
Bank of Cyprus is one of four Cyprus-based banks that will
be included in stress tests on European banks later this year.
Based on the most recently available data, Bank of Cyprus
had a core tier 1 capital, a ratio of financial strength, of
10.4 percent, increasing slightly to 10.6 percent from the
disposal of Serbian assets in May.
Under stress test baseline scenarios the ratio should exceed
8 percent, and in an adverse scenario 5.5 percent.
(Reporting By Michele Kambas; Editing by Susan Fenton and