The three largest banks in Cyprus; Popular Bank, The Hellenic Bank and The Bank of Cyprus, have announced this week that they will be undertaking “dramatic measures” in order to generate capital to recover losses obtained during the Greek sovereign debt crisis.

The three banks plan to regenerate funds by selling non-core assets and distressed properties. Popular and The Bank of Cyprus have reportedly sold off their assets in Australia and in addition, Popular has sold off a number of its subsidiaries in Eastern Europe. Despite these transactions, the profits made remain too low to cover the debt that they have incurred.

In order to cover their debts the banks will need to sell-off billions of euros worth of properties that have come into their possession from troubled developers. It has been suggested that the banks should sell the property at a reduced price in order to get it off their hands in much the same way that Spain successfully has.

The International Monetary Fund predicts negative growth of 1.2 per cent of GDP in 2012 but the Finance Ministry have been quick to point out that this prediction does not take positive prospects in the tourism and service sectors, where they expect to see improvement, into account. The Ministry were quick to admit that 2012 will be a difficult year for the country because of “the external global environment”.

As a result of the Greek sovereign debt bailout, the Cypriot banks need to secure 2.5 billion euros by June in order to protect themselves against further damages. Popular Bank must raise €1.35bn by June after it suffered losses of €2.5bn in 2011. If they cannot do so, they will have to turn to the Cypriot government for help.

Cyprus recently turned to Russia for financial aid and received a €2.5bn loan.

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