Cyprus Central Bank sets new core tier requirement for Cyprus banks

The Central Bank of Cyprus has set a new core tier 1 minimum capital requirement of 8% for the island’s banks with immediate effect. Core tier 1 replaces the capital adequacy ratio as the new benchmark for capital adequacy in Cypriot banks. Under previous regulations, the minimum core tier 1 requirement could have been as low as 2.0%.

The new directive may be considered to seeking an incrementally increase core tier 1 based on assets of the bank and the country’s GDP. Under that assumption, Cyprus’ two largest banks Bank of Cyprus and Marfin Popular would have to have a minimum core tier 1 capital ratio of 10% from 2014 onwards. Bank of Cyprus’s core tier 1 ratio at the end of March stood at 8.2%, excluding a 890 mln euro issue of convertible capital securities (CoCos) in the meantime. Marfin Popular Bank’s core tier 1 ratio is now at 9.4%.