Cyprus said to canvass ECB on debt swap easing bank burden

Nikos Chrysoloras & Georgios Georgiou

Cyprus wants to start talks with the European Central Bank on a debt swap that would ease the burden on the country’s largest lender, two people familiar with the discussions said.

In a meeting with ECB President Mario Draghi in Frankfurt on Wednesday, Cypriot President Nikos Anastasiades raised the possibility of converting emergency central-bank loans granted to Bank of Cyprus at the height of the country’s financial crisis into longer-term debt, said the people, who declined to be identified because the talks are private.

A restructuring of the loans, which are known as Emergency Liquidity Assistance, would bolster the Cypriot government’s efforts to guide the country out of a rescue program initiated during turmoil in March last year that almost forced it out of the euro. Ireland, which exited its bailout in December, conducted a similar debt swap in early 2013.

“The purpose of the meeting was to review the situation in the financial system and its strengthening through policies in which the ECB can play a decisive role,” the Cypriot presidency said in a statement.

Cypriot Finance Minister Haris Georgiades and the country’s central banker, Chrystalla Georghadji, accompanied Anastasiades to the meeting with Draghi. Cyprus wants to convert 5.5 billion euros ($7.4 billion) into longer term debt, one of the people said.

A spokesman for Anastasiades declined to comment on the matter. A spokeswoman for the country’s central bank didn’t respond to a phone call seeking comment.

“The ECB acknowledges the progress that has been made so far on budget consolidation, structural reforms and stabilization of the banking sector,” the Frankfurt-based central bank said in a statement...

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