Updated: 02/22/2013 17:34 | By Agence France-Presse

Cyprus banks need 8.86 bn euros in aid: report

The Greek-exposed banking system of Cyprus needs nearly nine billion euros as part of an EU bailout package to save the country from going bankrupt, a report said on Friday.

The official CNA news agency said a due diligence review conducted by US consultancy firm Pimco put the amount for bank recapitalisation at 8.86 billion euros ($11.71 billion), based on an adverse scenario.

In a draft agreement with a troika of international lenders, the amount for the banks had been set at up to 10 billion euros as part of a total package which could reach 17 billion euros -- matching the island's GDP.

The degree of bank recapitalisation will determine whether Cyprus needs to adopt even more austerity to make its debt sustainable.

To pay back such a loan would require the Cypriot government to start privatising state-run utilities, including its telecoms company, which it is loath to do.

Pimco submitted its due diligence report earlier this month but the Cyprus Central Bank said the amount would not be made public until a bailout agreement is signed with international lenders.

Eurogroup finance ministers are expected to agree on a rescue deal for Cyprus in March.

Pimco's review covered the credit portfolios of Bank of Cyprus, Cyprus Popular Bank, Hellenic Bank and a sample representing about 63 percent of the cooperative credit institutions.

Nicosia applied for EU financial aid in June when its two largest banks -- Bank of Cyprus and Popular Bank, both hard hit by the Greek debt crisis -- asked for financial assistance, but talks on agreeing a deal have dragged on.

Cyprus has pushed through harsh austerity measures of around 1.2 billion euros in tax hikes and savings, but fellow EU partners have called for more reforms.

Concerns have been raised -- mainly by Germany -- about the island's enforcement of anti-money laundering laws for fears it is a haven for Russian oligarchs.

Nicosia says it has done everything asked of it under the preliminary agreement with the troika -- the European Commission, European Central Bank and the International Monetary Fund.

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