The Central Bank of Cyprus hired Alvarez & Marsal to investigate the status of its banking sector. The decision to hire the consultants follows after two of the nation’s banks indicated they needed state support to survive.
In June Cyprus Popular Bank, the country’s second-largest bank, requested government backing for approximately €1.8 billion. Two days later, Bank of Cyprus, the country's biggest financial institution, sought €500 million of government aid. As a result, on June 25 Cyprus was forced to ask for an international bailout from the European Union.
“The investigation will provide clarity regarding the current financial stress in Cyprus and guide remediation to strengthen the stability of the banking sector” according to the spokesperson of the Cypriotic bank. Michael Olympios, chairman of the Cypriot Investors’ Association, stressed the need for the independent review: “This investigation is necessary given the failure of the two systemically important banks that forced them to ask for state support”.
The analysis from Alvarez & Marsal is similar to the recent studies performed by Roland Berger and Oliver Wyman for the Spanish central bank. After calculations, it was clear that Spanish financial institutions needed between €60 and €70 billion. Parallel to the analysis of the strategic advisory firms Spain also asked the “Big Four” accounting and advisory firms PwC, Deloitte, KPMG and Ernst & Young to execute detailed audits from the banking branche.