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imageNICOSIA: Bank of Cyprus, the Cypriot lender which recapitalised in 2013 using customer deposits, said it would engage directly with institutional investors for a possible capital increase.

The bank said any capital transaction would be structured in a manner allowing existing shareholders to participate. Bank of Cyprus, which briefly came under control of regulators following a tumultuous international bailout of Cyprus a year ago, has come under strong pressure from the central bank to up its capital buffers ahead of Europe-wide stress tests later this year.

In an announcement, Bank of Cyprus did not offer further details on the size of the issue, but said the bank's board of directors would convene to discuss any final terms of a capital transaction.

In a letter leaked to media this week, Cypriot central bank governor Chrystalla Georghadji told the bank it had three days, expiring on Friday, to agree to a roadmap on increasing its capital buffers by "at least" one billion euros.

It is understood that members of the board disagreed with the governor's earlier suggestion that participation of existing shareholders in a new issue be limited to 20 percent.

Several wealthy Russians, whose deposits in Bank of Cyprus were converted into equity last year, are now represented on the bank's board.

The process of using own deposits to recapitalise a bank, known as a "bail-in" was conditional to Cyprus receiving 10 billion euros in international aid from the IMF and the European Union.

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