NICOSIA -- The recapitalisation of the Cyprus financial sector may require up to €8.86 billion, on the basis of the adverse scenario of a due diligence review carried out by US-based investment consultancy firm, Pimco.

Pimco was commissioned to carry out a due diligence review of the Cypriot financial sector in the context of Cyprus` application for financial assistance from the European Stability Mechanism, estimated at €17.5 billion. The US firm delivered its final report containing the capital needs on the basis of a baseline and an adverse scenario on February 2. A Memorandum of Understanding containing the fiscal conditions of the financial assistance stipulates that the Cypriot banking sector may require "up to €10 billion".

A reliable source has told CNA that the capital shortfall of the financial institutions which were included in the review reaches €5.98 billion the baseline scenario, whereas the shortfall in the adverse scenario rises to €8.66 billion.

The memorandum stipulated that the due diligence will cover the credit portfolios of Bank of Cyprus, Cyprus Popular Bank, Hellenic Bank and a sample representing about 63% of the cooperative credit institutions` assets, as well as Greek Alpha Bank Cyprus, and Eurobank Cyprus.