The announcement last week that the government had guaranteed that it would buy up to EUR 1.8 bln shares in Cyprus Popular Bank (Laiki) if the bank cannot find other investors was welcome at a time when the news from Greece just kept getting worse.
Cypriot banks would stay the right side of Basel II even with a 50% haircut of Greek sovereign debt but would drop below the stricter level set for the EU-wide stress tests, according to our analysis.