#1Bank of Cyprus Group 100 Days A review of the period 01 June 10 September 2013 - Stabilisation, Restructuring and Integration of Laiki operations, Shareholders' General Meeting to elect new Board of Directors Bank of Cyprus KOINO ΚΥΠΡΙ WN Annual General Meeting 10 September 2013#2Requirements as per Memorandum of Understanding (MoU) Transitory Board of Directors and interim Chief Executive Officer appointed, until new shareholders are organised in a General Meeting, in order to facilitate: • Stabilization of the bank ● Restructuring of Cyprus operations - - Restructuring and Laiki Integration Improve operational efficiency • Risk management and optimisation of recovery of non-performing loans ● Liquidity management • Restructuring Plan that defines the bank's business objectives and credit policies • Shareholders' General Meeting Bank of Cyprus KYMPI 1#3Actions to comply with MOU 1 Implementation of Recapitalisation - 47,5% of bailed-in eligible deposits converted to equity, based on independent valuation exercise to ensure that the Bank meets the minimum capital adequacy ratios throughout the MoU program 2 Restructuring of Cyprus operations 3 4 - Restructuring and Integration ongoing, absorb Laiki operations and improve efficiency Branch rationalisation, with >60 branches (~31% of network) expected to close during 2013 - Personnel cost reduction, implementation of salary and benefit cuts and VRS Risk management - Strengthen risk management to reverse asset quality deterioration Optimize recovery of non-performing loans Funding and liquidity management - Liquidity outflows decelerate, with defined actions to regain trust of clients/market 5 Restructuring Plan - - Restructuring measures, covering business, operations, risk, liquidity and capital Strategy going forward focusing on viability and profitability of core domestic operations Bank of Cyprus KYMPI 2#41 Implementation of Recapitalisation • Recapitalisation through bail-in of depositors • Exit from Resolution status 47,5% of bailed-in eligible deposits converted into equity; total equity raised 3,8 bn Issued 18% of share capital to Cyprus Popular Bank for the acquisition of certain assets, liabilities, insured deposits and ELA; Valuation based on KPMG exercise • Shareholders' General Meeting Bank of Cyprus KOINO KYMPI Exit from Resolution Status on 30 July 2013 Delivery of KPMG report early August 2013 Notice of Shareholders' General Meeting sent out on 8 August 2013 for a General Meeting on 10 September 2013 13#52 Restructuring of Cyprus operations Initial decisions that needed to be made to preserve stability and continued viability during the transition period include: Group organisational structure Branch network Human resources Systems and procedures Bank of Cyprus KOING KYMPI 4#6Restructuring of Cyprus Operations Integration and Restructuring Governance Board of Directors Validate and approve Restructuring Plan deliverable Provide overall orientation and guidance Board Restructuring Committee Develop vision, strategy and business model • Take all key decisions and set targets for restructuring Coordinate implementation of core business restructuring Restructuring Steering Committee Restructuring Project Office Executive Restructuring measures Committee Balance Sheet Optimization Committee Ensure smooth integration of CPB Retail & Overseas Corporate IBS SME Operations Human Financial Markets Operations Risk Finance Resources & IT Bank of Cyprus KYMPI Masterplan implementation • Monitor overall • implementation plan and report on progress Financial Model . • • Execute key balance-sheet measures as decided by Steering Committee Implement projects to realise integration synergies and further restructuring measures Harmonise policies, operations and processes across BoC and Laiki LO 5#72 Restructuring of Cyprus Operations Branch Network Overlap in branch networks... • Starting with 203 branches ✓ 118 from BOC ✓ 85 from ex-Laiki • Closed 37 branches until 6 September ... results in a significant reduction in branch numbers -31% 202 191 166 140 2013 (currently operating 166 branches) On-going: Continuing with plans to reduce branch network to around 140 branches by Dec- 2013 Bank of Cyprus KOINO KYMPI May-13 Jun-13 Sep-13 Dec- 13 est. Ultimate branch number to be decided upon the completion of Restructuring Plan 00 6#82 Restructuring Cyprus Operations Steps undertaken to reduce staff cost Annualized Cyprus bank-only cost base € mn. 286 23 -36% • Actions to reduce staff cost through salary cuts and Voluntary Retirement Scheme (VRS) From 1/6/2013 salary cuts 81 182 2013 pre-merger May-Jun 2013 Salary Cuts at BOC Jul-Aug 2013 2013 post VRS Bank of Cyprus KYMPI VRS in Jul-Aug 2013; about 1.370 full time employees left the Group 7#92 Restructuring Cyprus Operations Steps undertaken to reduce staff numbers Cyprus Bank headcount Bank of Cyprus BOC Laiki KYMPI Employees 6.033 5.725 -24% 4.355 3.616 3.356 2.417 2.369 Dec-2012 Mar-13 After VRS VRS in July/August 2013; about 1.370 left the Group Ultimate number of staff to be decided upon the completion of the Restructuring Plan 8#103 Risk Management • Review end-to-end credit processes, governance and policies to maximise the bank's recovery rate for non- performing loans (NPLs) BOC will revamp and strengthen its risk and end-to-end credit processes (sanctioning, monitoring, delinquency management, recovery) Credit sanctioning has already been separated from business and will continuously be revised to reflect market conditions Bank of Cyprus KOINO KYMPI Delinquency management will be centralised and enhanced, to focus on collections as well as on rescheduling/restructuring viable customers NPLs Recovery will be enhanced and will handle cases based on size and recoverability criteria, and within a more flexible legal framework that is expected to emerge 9#113 Risk and Credit Management End-to-end processes are being strengthened to reverse trends in asset quality • Risk Management Governance Centralized Risk division, led by an independent CRO • Clear and separate organizational responsibility for credit risk processes - - - - Business/credit origination Credit sanctioning Credit monitoring Workout and recovery Strict Credit Sanctioning Clearly defined sanctioning authorities, with branch manager limits revoked • Strict credit criteria across portfolios (e.g., avoided sectors, LTV, DTI) Frequent review of credit limits and credit concentrations • Proactive Delinquency Management & Recovery Clear assignment of responsibility for early/late collections, workout and recoveries • Introduction of transparent criteria for transfer between different stages of delinquency • Launch of pre-packaged risk mitigation products for Retail and SME customers • "Crash" 90+ dpd programs across all portfolios Bank of Cyprus KOINO KYMPI 10#124 Funding and Liquidity Conditions Actions to Improve Liquidity Ways to improve liquidity and launch new products • Embark on roadshow to raise the Group's profile Actions to improve liquidity including: - - - Issuance of government guaranteed bonds Deleveraging and asset disposals Launch new deposit and other product campaigns across business lines Bank of Cyprus KOING ΚΥΠΡΙ Stepping up efforts to reduce ELA that stigmatizes the Bank Restoration of status of ECB eligible counterparty, provides access to ECB funding leading to reduced ELA funding - ECB funding under improved terms, given that the rate for main refinancing operations stands at 0,5%. • To embark on marketing roadshow following recapitalisation and exit from resolution - - Strengthen market access Reduce collateral requirements pertaining to derivatives, which currently consume considerable liquidity 11#135 Restructuring Plan Defining Business Objectives and Credit Policies Comply with MOU par. 1.28 by delivering "...a restructuring plan ..." • Go beyond MoU requirements, to adopt international "Best Practices" and integrate relevant work across different areas of the Group (incl. governance, risk, provisioning) Appointed McKinsey to support on Restructuring Plan delivery and to validate governance against “best practices" Appointed PwC to adopt "Best Practices" in Corporate credit Ongoing: Developing the Restructuring Plan (to be approved by mid- October 2013) - 1 - - Articulate business objectives Integrate Laiki operations and improve operational efficiencies Optimize recovery of problematic loans and define credit policies Normalize funding conditions Ensure capitalization targets are met Bank of Cyprus KOING KYMPI 12#145 Restructuring Plan Radical shift in the Group's strategy Objectives of Restructuring Plan • Rebuild trust and confidence of depositors and investors • Build a resilient, systemic institution, able to withstand further shocks and economic turbulence • Integrate ex-Laiki operations, to maximize synergies and bottom-line impact • Preserve BoC's status as the cornerstone of the Cypriot economy Potential implications for BoC strategy - • Re-orient the Group's business model Revamp offering to key customer segments and especially to most promising sectors - - Revise IBU business model in line with the new environment Develop lean operating model going beyond capturing of full synergies with ex-Laiki Strengthen risk management capacity, capabilities, processes and infrastructure Implement actions to improve capital and liquidity position - Assess international presence, retaining very selective presence abroad Gradually exit capital intensive or non-core activities Bank of Cyprus KOINO KYMPI 13#155 Restructuring Plan Overseas and non-core subsidiaries • Set immediate . targets for overseas subsidiaries to become self-funded and profitable Strategy for overseas and non- core subsidiaries • Immediate action for subsidiaries and repossessed properties in Greece Integrate part of Laiki-UK operations into BOC-UK • Created International Operations Division to manage overseas operations Set targets for subsidiaries to become self-funded and improve performance to reduce exposure mainly to Russia and Ukraine Appointed advisor to consider strategy for Ukraine Investigating investor interest for real estate in Cyprus • Sale of Asset Management Company in Greece (AEDAK); Considering offers for Brokerage and Insurance Companies Ongoing actions: Defining strategy for countries with BOC presence and assess opportunities and timing to exit such markets. Setting-up a real estate fund for ~600 repossessed properties in Greece valued at 220 mn Assessing opportunities to sell part of Laiki-UK loans, with remaining being integrated into BOC-UK (with deposits) Bank of Cyprus KOINO KYMPI 14#16100 days - Roadmap to Shareholders' General Meeting Early 26/04/13 New BoD 06/13 McKinsey for 07/13 KPMG Restructuring valuation 08/13 Delivery of KPMG appointed 10/09/13 AGM Plan exercise Report 01/06/13 New CEO and BoD empowerment; Stabilization, Consolidation, AGM 06/13 Active steps for integration of ex-Laiki Salary cuts, branch closures, VRS 30/07/13 Recapitalisation Resolution Exit OO 08/08/13 Notice of AGM Bank of Cyprus KOINO KYMPI 15#17Key Challenges for the Bank - Managing liquidity – Defending deposit franchise – Regaining trust - Integrating Laiki Bank - Achieving operations efficiencies Defending overseas investments Managing loan quality deterioration - Effective management of problem loans Identify and explore growth opportunities Macro developments / Progress of Adjustment Program in Cyprus Bank of Cyprus KOINO KYMPI 16