July 5, 2013 / 5:57 PM / 4 years ago

ECB lifts suspension on Cyprus debt eligibility

FRANKFURT (Reuters) - The European Central Bank said on Friday it was lifting a suspension on the eligibility of Cyprus’s debt for use in its refinancing operations after Standard & Poor’s upgraded the island state’s credit rating.

“The Governing Council of the European Central Bank (ECB) has acknowledged the upgrades of credit ratings of the Republic of Cyprus following the successful completion on 1 July 2013 of the transactions previously announced by the country’s Ministry of Finance,” the ECB said in a statement.

“In light of the rating changes, the Governing Council has decided that marketable debt instruments issued or fully guaranteed by the Republic of Cyprus shall again constitute eligible collateral for the purpose of Eurosystem monetary policy operations.”

“This decision applies to all outstanding and new marketable debt instruments issued or guaranteed by the Cypriot government and will come into force on 5 July 2013 with the relevant legal act, which will also specify the haircuts applicable to these assets,” the ECB added.

S&P upgraded Cyprus’s rating to CCC-plus from selective default on Wednesday following completion of an exchange of bonds the credit rating agency deemed distressed.

The ECB had temporarily suspended the eligibility of Cyprus’s debt for use in its refinancing operations after an S&P downgrade to selective default, which came in response to Cyprus’s announcement on the debt exchange.

Reporting by Paul Carrel

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