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Bank of Cyprus Recapitalized

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The Central Bank of Cyprus and the Ministry of Finance have on 30/07/2013 formally announced the completion of the resolution process of Bank of Cyprus.

The final stage of the resolution process involved the recapitalization of the bank through the conversion of a percentage of uninsured deposits into Bank of Cyprus shares. Until 30/07/2013, 37.5% of uninsured deposits had already been converted into Bank of Cyprus shares. A further 22.5% had been earmarked for a possible future conversion while the remaining 40% had initially been frozen with 10% being released on 02/04/2013.

The announcement sets the final percentage of the conversion of uninsured Bank of Cyprus deposits into shares at 47.5%, i.e. an additional 10% to what has already been converted. Meanwhile, the remaining balance of uninsured deposits will be released gradually. 12% of deposits that were previously blocked (5% of total) will be released following recapitalization and the balance will be split evenly into three separate time deposits of six, nine and twelve months respectively. These deposits will receive a higher rate of interest than the corresponding market rate. Bank of Cyprus will retain the option to renew these deposits once for the same duration.

With the said conversion of deposits into shares Bank of Cyprus will achieve a capital adequacy ratio of around 12% (Common Equity Tier 1 ratio).

The recapitalization of Bank of Cyprus marks the end of its resolution. The announcement states that no further resolution measures under the Resolution Law will be applied to Bank of Cyprus.

In addition to the above, in their announcement the Central Bank of Cyprus and the Ministry of Finance state that the share structure of Bank of Cyprus will be amended so that all shareholders will now hold ordinary shares. It is also mentioned that the depositors of Legacy Laiki will be compensated with shares in Bank of Cyprus that, in total, are expected to constitute around 18% of the combined group’s share capital.

We expect decrees implementing the above to be issued in the forthcoming days. The decrees will hopefully further clarify the precise implications of the above on Bank of Cyprus’ and Laiki Bank’s shareholders, depositors and other creditors.

We promise to promptly update you of all relevant developments.