The European Commission has temporarily approved a 1.8 billion euros ($2.33 billion) recapitalization of the troubled Cyprus Popular Bank and has given Cyprus six months to present a plan of reconstructing the institution before the EU decides on whether there will be further assistance.
The Bank issued new shares of 1.8 billion euros in May this year but few sold, forcing the government to buy up the rest and become the largest shareholder. Cyprus paid the bank by transferring a 12-month bond.
The EU can require banks to sell assets or change behavior after they receive large amounts of state help. Cyprus Popular Bank last month posted a first-half net loss of 1.3 billion euros, or $1.68 billion.
The Commission stated that the rescue recapitalization was made according to European laws. The bank is the second-largest financial institution in the country and its failure could have had a disastrous consequence for the island’s ailing economy.
Source: European Commission