Will the Bank of Cyprus collapse

The biggest bank of Cyprus, Bank of Cyprus, is still in danger and it might require additional recapitalization according to Panicos Demetriades, the governor of the Central Bank. The amount that will be needed to secure the core tier 1 ratio of 9% will be made on the grounds of a value assessment and is expected to be ready in the end of June. Cyprus received ten billion euro after it signed a deal with the International Monetary Fund and Eurogroup, promising to restructure its banking system. The bailout was provided after many of the depositors have contributed have 37.5% of their EUR 100 000 deposits in order to save the bank at the end of April.

As the governor of the Central Bank said, the restrictions on bank transactions should be lift carefully to void triggering outflows of disruptive capital and certain liquidity problems. The European Central Bank, the European Commission and the International Monetary Fund have estimated an almost 9 % contraction of the Cypriot economy for 2013. According to Demetriades, the risks in front of the banking sector are high, but he added that when the banking system stabilizes, the economic activity will recover.