NICOSIA  - Cyprus said on Saturday that consultations on defining a bailout sum for its Greece-exposed banks were still in progress, effectively overshooting a deadline to decide how much aid the cash-strapped island will need from lenders.
Evaluating bank capital needs is crucial to determining how much Cyprus should receive in badly needed financial aid. The island, one of the euro zone’s smallest economies, sought IMF and EU financial assistance in mid-2011. “The assessment of technical details for the calculation of capital needs of banking institutions in Cyprus is still in progress,” the island’s central bank said. No further details were available.
Cypriot banks were badly burnt by an EU-sanctioned writedown of Greek sovereign debt held by private investors.
Investment managers PIMCO are carrying out the review of bank capital needs, and its findings are being assessed by a steering committee made up of lenders and Cypriots.
A definitive result had been expected by January 18. A preliminary estimate of a draft bailout deal said Cyprus could need up to 10 billion euros to plug holes in its banking sector. On that basis, its total bailout including fiscal requirements could reach 17.0-17.5 billion euros, equivalent to the island’s annual economic output.
A European Union official said on Friday that a bailout for Cyprus is likely to be concluded only in the second half of March, after Cypriot elections next month.