On 4 of July internationally-known credit rating agency FITCH Ratings issued statement in relation to an upgrade of Bank of Cyprus’ (referred to as “BoC”) long-term issuer default rating (IDR) from RD to CC and Hellenic Bank’s (referred to as “HB”) – from RD to CCC. In addition to that, Fitch has also upgraded short-term IDR of both banks from RD to C. The Viability Rating (VR) of the banks was affirmed by the agency: BoC – at CC, HB – at CCC.

Fitch upgrade was announced on the second day after the board of BoC made unanimous decision as regards to searching investors for a proposed increase of capital that is expected to be in the amount of around €1b. The increase of capital is required for speeding up the process of restructuring and strengthening the financial position of the whole group.

The Minister of Finance of Cyprus Harris Georgiades considers such advancement to be of “vital importance”. The Minister also added that the upgrade of both banks “is a decisive factor in our effort to revitalize economic activity, which cannot come in without prospects and confidence”.

Notwithstanding the good news from Fitch, Cyprus still has to find solution of the problem related to non-performing loans (referred to as “NPL”) in the banking system as according to Fitch’s statement “the two banks’ most important challenge will be to improve NPL recoveries, for which banks have internally strengthened their recovery units”.