Cyprus says bank results could expedite end of capital controls

NICOSIA (Reuters) - Results of stress tests on Cyprus's banking sector have shown a re-establishment of stability in the banking sector, and could expedite the complete lifting of capital controls, Finance Minister Harris Georgiades said. "It won't be tomorrow but we shall commence the process of lifting the very last restrictions soon, in a gradual and staged manner," Georgiades told Reuters. Cyprus imposed capital restrictions to prevent a bank deposit flight in 2013 at the height of a tumultuous bailout from the European Union and International Monetary Fund. Domestic restrictions have been dismantled, but large capital transactions abroad still have to be vetted. Tests on three Cypriot banks on Sunday showed only one, Hellenic Bank, requiring 105 million euros in additional capital under an adverse scenario. Two others, Bank of Cyprus and the Co-Op, although showing shortfalls last year, have addressed those issues in the meantime. Georgiades said the fact the stress tests showed that a 1 billion euro buffer was unnecessary for the financial sector materially pushed down projections of public debt. The buffer was included specifically for Co-Op Bank, which received a 1.5 billion euro cash injection this year out of a 10 billion euro bailout package agreed with international lenders in March 2013. "It will now be below 105 percent, much closer to 103 percent," Georgiades said, referring to 2015. "This represents a major change of circumstances... And obviously one which makes the target of going below the symbolic threshold of 100 percent perfectly feasible before 2017." The EU and the IMF had forecast a public debt of 126 percent of gross domestic product for the island nation in 2015, factoring in the 1 billion euro buffer. (Reporting by Michele Kambas; Editing by Robin Pomeroy and David Evans)