Fresh delays to finalising recapitalisation needs

THE CENTRAL Bank yesterday announced that consultations on defining a bailout sum for its Greece-exposed banks were still in progress, effectively overshooting a deadline to decide how much aid the cash-strapped island will need from lenders.
Evaluating bank capital needs is crucial to determining how much Cyprus should receive in badly needed financial aid.
“The review of the technical details of the due diligence to estimate the capital needs of Cyprus’ financial institutions is still on-going. An announcement will be made once this review is completed,” said the Central Bank.
Cypriot banks were badly burnt by an EU-sanctioned writedown of Greek sovereign debt held by private investors.
Investment managers PIMCO are carrying out the review of bank capital needs, and its findings are being assessed by a steering committee made up of lenders and Cypriots.
A definitive result had been expected by January 18, but according to Cyprus News Agency (CNA) sources, no agreement was reached on the final amount required for the recapitalisation of the banks during Friday’s teleconference with the steering committee.
An agreement is expected to be reached within the next 10 days, the same sourced added.
A preliminary estimate of a draft bailout deal said Cyprus could need up to €10 billion to plug holes in its banking sector, though this is a worst case scenario.
On that basis, its total bailout including fiscal requirements could reach €17-17.5 billion, equivalent to the island's annual economic output.
The central bank is working towards reducing the worst case scenario figure to under €9 billion, with the difference apparently playing a decisive role in determining whether Cyprus’ public debt will be sustainable or not post-bailout. Debt sustainability or the lack of it, in turn, will decide whether the troika will demand the privatisation of state or semi-state organisations like CyTA and the EAC before lending Cyprus much-needed cash.  
The delay in concluding with PIMCO means Finance Minister Vassos Shiarly will attend tomorrow’s Eurogroup meeting without a final figure on the recapitalisation needs of Cypriot banks, pushing further back any possible agreement on a Cyprus bailout among the eurozone’s finance ministers. 
A European Union official said on Friday that a bailout for Cyprus is likely to be concluded only in the second half of March, after presidential elections next month.