NICOSIA - The Cypriot government insists on the adoption of a baseline scenario concerning the capital needs of the banking sector, Spokesman Stephanos Stephanou said following the delivery of the Pimco report.
"We will insist on the baseline scenario," Stephanou said in statements a few hours after US investment consultancy firm, Pimco, delivered its final report on the capital needs of the Cypriot banking sector, in the context of Cyprus` application for financial assistance from the European Stability Mechanism.
The Central Bank has said that the resultsof the final report will be made public when they have signed the Memorandum of Understanding between the Republic of Cyprus and international creditors. However, lengthy negotiations are expected to take place before an agreement is reached in March.
Pimco was commissioned to carry out a due diligence review of the Cypriot financial sector and determine the capital needs of the financial institutions as part of Cyprus’ application for financial assistance from the European Stability Mechanism.
The report will be examined by the Steering Committee composed of representatives of the Cyprus Finance Ministry and the Central Bank, the European Commission, the European Central Bank, the European Banking Authority, the ESM and the IMF as an observer. Sources told CNA the report will be delivered by the close of business in Pimco’s headquarters in California.
The Steering Committee will then take into account the mitigating circumstances that have been put forward by the Cypriot financial institutions. Press reports suggest that Pimco estimates that the capital needs of the Cypriot banking sector will reach €10 billion in the adverse scenario, which in turn means that the Cypriot financial assistance package will reach €17.5 billion roughly equivalent to the island’s GDP. The memorandum agreed in principle between the Troika (EC, ECB and IMF) and the Cypriot Authorities, provides for a bank support facility up to 10 billion euro.
After their meeting on January 21, the Euro area Finance Ministers (Eurogroup) announced that the capital needs of the Cypriot banking sector will be announced after the agreement of the financial assistance programme scheduled for March.