IMPLEMENTATION LEVEL

National

AFFECTED FLOW

Inflow

ANNOUNCED AS TEMPORARY

No

NON-TRADE-RELATED RATIONALE

No

ELIGIBLE FIRMS

all

JUMBO

No

TARIFF PEAK

No
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Inception date: 13 Sep 2012 | Removal date: open ended
Still in force

Capital injection and equity stakes (including bailouts)

On 15 May 2012, Cyprus notified the EC about their intention to recapitalize the Cyprus Popular Bank (CPB). Only days later, Cyprus notified a EUR 1.8 billion recapitalisation for CPB.
 
CPB is the second largest bank in Cyprus with a market share of 18 / 19 percent (in terms of deposits/loans). Cyprus has branches in China, Greece, Malta, Romania, Russia, Serbia, UK, Ukraine. In the aftermath of the financial crisis, Greek Government Bonds lost substantial value and the CPB, holding these bonds, was facing large losses.
 
The recapitalisation is performed in the form of 'a renewable 12-month (with a five-year rollover) zero-coupon sovereign bond'. (para. 27, Letter from the EC to Cyprus, Brussels 13.09.2012)
 
The EC finds that: 'the measure ... confers an advantage on CPD by allowing the Bank to raise the capital required in order to strengthen its capital and avoid insolvency'. (para. 37)
The EC finally concludes that: 'the measure is also liable to affect trade between Member States and to distort competition. Cyprus Popular Bank competes on, amongst others, the markets for retail savings, mortgage lending and commercial lending in Cyprus. The Bank is also active in other European financial markets, while on the Cypriot market some of its competitors are subsidiaries of foreign banks'. (para. 38)
 
The list of affected countries therefore consists of a) presence of Cypriot banks in other countries and b) competing subsidiaries within Cyprus.
 
A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory.

AFFECTED COUNTRIES

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