Russian, Ukrainian companies become main owners of Bank of Cyprus

About 45 Russian and Ukrainian companies will own a considerable chunk of the Bank of Cyprus equity under arrangements made following its recapitalization by using depositors money, a source having inside knowledge told Xinhua on Monday. "There are 40 to 45 foreign companies, mostly Russian but also some Ukrainian, between them holding about 12 percent of the bank's stock," said Andreas Neocleous, owner of a big law office which represents companies owing 2.5 percent of equity. Under an unprecedented arrangement forced upon Cyprus in late March by the Eurogroup and the IMF in return for a 10-billion-euro bailout deal, large savers in the Bank of Cyprus lost 47.5 percent of their deposits, which were turned into bank equity. The previous owners of the bank lost their investment as their shares were devalued to nominal value of 1 euro cent each. Since then, the so-called bail-in method has become the official policy of the Eurogroup for saving faltering banks in its 17 member states. Law offices and auditing firms representing new owners of the Bank of Cyprus were invited on Monday to the Central Bank of Cyprus to discuss with its governor, Panicos Demetriades, the composition of the new Bank of Cyprus board of directors to be appointed at a shareholders meeting on Septemper 10. It is not yet known how many members of the new board will be appointed by the foreign owners of the 12 percent share in the bank. However, another large group of shareholders owning 18 percent of the bank's stock were reported to be eligible to be represented by four members on the new board. This group is made up of former depositors in the now wound down Cyprus Popular Bank, also known as Laiki, who are represented by the Central Bank of Cyprus in its capacity as Laiki's resolution authority. The bank was resolved and merged into Bank of Cyprus, after reaching insolvency following the pumping of 9.2 billion euros in emergency liquidity assistance by the European Central Bank. Neocleous told Xinhua that another considerable chunk which he estimated at about 30 percent of Bank of Cyprus stock is owned by many hundreds of small foreign depositors who are believed to be mostly Russians. "The share of each of these depositors is too small to be represented on the bank's board and may be invited to be represented by proxy," Neocleous said. However, shareholding provident funds belonging to employees of large firms, including Bank of Cyprus employees, as well as Laiki Depositors Association, an organization which represents depositors who do not accept their representation by the Central Bank of Cyprus, has said it will stake representation on the new board. Bank of Cyprus exited resolution state only recently but it has not yet assumed a leading role in banking affairs pending the appointment of a new board and management, and also securing liquidity from the European Central Bank.