* Cyprus preliminary deal sees up to 10 bln euros in banking
* Island hit badly by Greek exposure
* Adjustment programme sees salary cuts
NICOSIA, Nov 30 Cyprus will require up to 10
billion euros ($13 billion) to refinance its banks, severely
affected by the euro zone debt crisis and exposure to Greece,
according to a draft deal with international lenders seen by
Reuters on Friday.
The deal, contingent on approval from euro zone finance
ministers and national parliaments, also states that the
objective of the adjustment programme with the Mediterranean
island is to achieve a primary balance of 4.0 percent of GDP in
"Noting that the European Banking Authority (EBA) deadline
of 30 June 2012 has been missed by two banks and that public
capital support has already been provided to one bank, while the
State itself is under financial stress, a bank support facility
of up to EUR billion is foreseen under the programme, which
will also cover potential future capital needs, determined on
the basis of a top-down capital exercise, as well as potential
resolution costs," the draft deal obtained by Reuters states.
The exact amount per bank would be determined in a due
diligence exercise, the report said, while brackets surrounding
the recapitalization needs suggested it could be subject to
Earlier on Friday, Cypriot Central Bank governor Panicos
Demetriades said the amount was an estimate, pending assessments
from consultants expected next week.
The document also said the Cypriot central bank would direct
all banking groups to increase their minimum Core Tier 1 capital
ratio - a measure of financial strength - to 9 percent from 8
percent by Dec. 2013.
A process of on-going fiscal consolidation would seek to
achieve a 4.0 percent of GDP primary balance in 2016, "and
maintain such a level thereafter", the document stated.
Employees in the public sector would received a scaled
reduction in pay from between 6.5 and 12.5 percent, it said.
Cyprus sought aid from the IMF and the EU in June after its
banks reported significant losses on a restructuring of Greek
debt earlier in the year.
Media reports have suggested that Cyprus's total bailout
needs, including fiscal requirements, could reach 17.5 billion
euros, virtually the equivalent of its gross domestic product.