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The fate of bank shareholders in Cyprus is unclear

01 April 2013 / 16:04:48  GRReporter
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After a long break, the stock exchange in Cyprus is expected to reopen. Monday in Cyprus is a rest day and an official national holiday dedicated to the independence from the British and to the union with Greece. On Tuesday, 2 April, the stock exchange will start operating but it will not trade the shares of the two largest local banks, namely, Cyprus Popular Bank-CPB (Laiki) and the Bank of Cyprus, on the financial market. They will remain frozen until the fate of the two institutions is clear and their recovery process is completed.

According to the latest information provided by the Securities and Stock Exchange Agency, owners of shares of CPB will have to wait until the recovery of the "bad" part of the Cypriot bank is completed in order for them to obtain some kind of compensation for their losses. These compensations may be in the form of bonds related to the future extraction of natural gas from the coast of Cyprus. Of course, there is a possibility of shareholders being ignored and not obtaining any compensation for the losses they have incurred due to the unexpected financial crisis.
 
The shareholders of the Bank of Cyprus do not know what to expect, mainly because there is no accurate information on how the bank will be transformed. The shareholders of the Bank of Cyprus do not know what to expect, mainly because there is no accurate information on how the bank will be transformed.  It is expected that if the value of the shares is cut, they will be replaced with new ones that will be of a different category compared to the older ones of lower value. According to Naftemporiki, if the Bank of Cyprus has a new owner, the customers will not lose their accounts in it. Imeresia reports that the holders of accounts in the same bank will lose about 60% of their deposits, which exceed 100,000 euro. Despite the expected reshuffle, experts are warning that the common trading platform of the stock exchange in Athens and of that in Cyprus will not change. However, the recent developments in Cyprus have had a negative impact and it is expected that the interest in Cypriot shares may seriously decline. This will inevitably lead to a contraction of the trade between the two markets, but it will not interrupt the operation of the common exchange platform.

The government and the boards of the banks have formed four commissions to manage the crisis, which are responsible for the recovery of the financial institutions. The commissions have been examining the different scenarios that could emerge after Tuesday morning when the stock exchange in Cyprus will reopen.

The original plan was to reopen the financial market in Cyprus on 28 March this year, when the Cypriot banks resumed their operations. However, the management decided to keep the stock exchange closed mainly because of the uncertainty and the restrictions on trade. According to the head of the stock exchange in Cyprus, the shares of CPB and the Bank of Cyprus had created 60% of the turnover of the domestic financial market. The uncertainty about the recovery of the two financial institutions has driven the management of the stock exchange to delay the resumption of trade.

The problems associated with the movement of capital from the Cypriot banks have been gradually overcome due to the issuance of a special decision on the matter by the Central Bank of Cyprus. Experts stress that the members of the Athens Stock Exchange, acting from a distance, can make transactions even if they are located in Cyprus. The members of the Athens Stock Exchange in Cyprus should follow all instructions given by the supervisors and should make investment decisions in accordance with the temporary capital restrictions. So far, analysts claim that even if one of the banks closes its operations, the customers will not lose their bank portfolios, as they will be transferred to a special account, which will keep their customer profile.

Tags: MarketsEconomyCrisisCyprusBanksStock exchange
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