ATHENS: Bank of Cyprus (BOC) said on Thursday that a directive by the European Union (EU) bank supervisory body on non-performing loan provisions wiped out a net profit for 2015 and caused it to post a net loss of 400 million euros (about 440 million U.S. dollars).
The bank said in a press release that it had to make an increased provision for impaired loss after discussions with the EU Single Supervisory Mechanism (SSM).
Bank of Cyprus is the only bank in the world which used “bail-in”, the seizing of its customers’ money, to recapitalize.
Under directions by the Eurogroup and the International Monetary Fund it converted 47.5 percent of deposits over 100,000 euros into banks shares in the context of a 10-billion-euro bailout for Cyprus in 2013.
BOC said that had it not incorporated the SSM requirements it would post a net profit of 100 million euros, with a core tier 1 capital ratio exceeding 16 percent.
The bank posted a net loss of 400 million euros for 2015 after increasing its provisions for non-performing loans by 600 million euros during the fourth quarter of the year.
BOC said the increasing in provisions for impaired loans raised its coverage ratio in the region of 50 percent.
It also said that after boosting its coverage ratio, its core tier 1 capital is expected to remain strong at approximately 14 percent, down from 15.6 percent in September 2015.
It added that it does not need to raise additional capital.
The Central Bank of Cyprus urged banks to address the issue of impaired loans, now standing at 47 percent of the total as a matter of urgency, saying it is the number one risk for the Cypriot banking system.
Cyprus is set to exit its three-year economic adjustment program on March 31, having achieved a spectacular return to growth this year following years in deep recession.
