BRUSSELS Nov 6 Cyprus secured EU regulatory
approval on Tuesday for a guarantee scheme for its banks on
condition that lenders that get help limit their expansion and
provide viability plans to ensure they do not have an unfair
advantage over rivals.
The two largest banks in Cyprus suffered huge losses due to
writedowns of Greek debt and they turned to the government for
aid in recapitalising. The government is itself now in talks
with international lenders on a possible sovereign bailout
expected to total 10 billion euros.
The European Commission said Cyprus notified regulators of
its proposed bank guarantee scheme which will cover new loans
agreed and new bonds issued before Dec. 31, with a maturity of
up to five years.
The executive Commission said the scheme complied with EU
state aid rules, but it laid out some conditions for applicants
to the plan.
"Beneficiaries will be subject to behavioural commitments to
avoid any abusive use of the state support. These include
limitations on expansion and marketing and conditions for staff
remuneration and bonus payments," it said in a statement.
"Finally, Cyprus has committed to notify viability plans for
companies making intensive use of the scheme."
The Commission has approved similar plans for a raft of
countries in the 27-European Union bloc in the last three years.
(Reporting by Foo Yun Chee; editing by Rex Merrifield)