Forex Flash: Recapitalization effort under way in Cyprus – Deutsche Bank

FXstreet.com (Barcelona) - The new deal in Cyprus, which has been approved by the 17 Eurozone finance ministers as well, will see Laiki split into a "good" bank and a "bad" bank. According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “The good bank will be folded into the Bank of Cyprus (BoC) while the bad bank will be wound up over time. BoC will assume €9.0B of Laiki's ELA liabilities, and will be recapitalized through a deposit-to-equity conversion of uninsured deposits such that a capital ratio of 9% is achieved.”

The bail-in of large Laiki depositors will contribute about €4.2B to the recapitalization. The Eurogroup reiterated that "all insured depositors in all banks will be fully protected in accordance with the relevant EU legislation". The Governing Council of the ECB will provide liquidity to the BoC as part of the deal. The deal will unlock EUR10bn in funds from the Troika's "macro adjustment programme" which, apparently, will not be used to recapitalise Laiki and BoC – Cyprus will receive the first funds in May.