THE CENTRAL BANK is today expected to announce the name of the consultancy selected to verify a due diligence of Cypriot banks carried out by investment company Pimco.
Pimco has already released an interim review; its full report is scheduled to be delivered by January 15, six days before the next meeting of euro-area finance ministers. The interim report was submitted to a steering committee comprising potential lenders and Cypriot authorities.
In the meantime the Central Bank, a member of the steering committee, asked that a consultancy review and verify the methodology used by Pimco.
Following a tender selection process, the name of the consultancy is expected to be revealed today. It’s understood the firm will deliver its verdict before January 15, the date on which Pimco is expected to disclose its full report.
Central Bank sources said yesterday the consultancy has been hired to offer assistance on “highly technical data” within the Pimco report.
“We wanted to double-check that the diligence is accurate…leaving no room for doubt as to the [capital] needs of the banks,” the same sources said.
This, they stressed, did not involve checking Pimco’s method of calculating banks’ non-performing loans (NPLs); that issue has long been settled.
The banks’ recapitalisation needs will determine the size of bailout required by Cyprus.
Meanwhile yesterday, the island’s second largest lender Popular Bank announced a voluntary exit plan for its some 3,000 employees in Greece, offering packages of up to €120,000.
According to reports, those under the age of 45 will be offered four-tenths of their salary for every year of service; employees aged 45 to 55 will receive 100 per cent of their salary for each year of service; and those aged 55 and above will get 1.25 salaries for every year of service.
A similar plan was made available to staff in Cyprus, with about 100 employees opting to take early retirement.
Amid mounting capital losses, Popular has called an extraordinary general meeting for February 13. The group sustained losses of €1.7 billion during the first three quarters of the year due to increased risk and goodwill write-offs.
Having acquired €1.8 billion worth of shares in Popular in May, the state passed a directive aimed at downsizing the group’s operations as part of a cost-cutting drive. Under the directive, the group’s payroll must be additionally reduced by at least 8 per cent within 2013.
And the Bank of Cyprus (BoC) announced yesterday, that the group’s results after tax and before the impairment of Greek government bonds for the financial year ending December 31 2012 are expected to have a significant negative deviation compared to the 2011 results.
The deviation is mainly due to increased provisions for impairment of loans (due to the continuing deteriorating economic conditions and the adoption of stricter assumptions in the context of the Pimco review) as well as reduced operating income, the bank said.
The revised profit results would impact the group’s capital adequacy ratio; the bank forecast that, as of December 31 2012, its Core Tier 1 capital ratio could go under 5 per cent.
“On the basis of the above expectations…the bank is in contact with the relevant supervisory authorities and troika, aiming at finding the best possible solution for all parties involved,” the statement said.