Cypriot Greek Orthodox Archbishop Chrisostomos II (C) attends a ceremony held at the Ayios Constantinos and Elenis cemetery in Nicosia on July 15 2014 to mark the 40th anniversary of the Athens-backed coup aimed at union (Enosis) with Greece which led to the Turkish invasion of the northern third of the east Mediterranean island five days later. AFP PHOTO/YIANNIS KOURTOGLOU (Photo credit should read Yiannis Kourtoglou/AFP/Getty Images)

The archbishop of Cyprus has taken the unusual step of urging thousands of small investors in the island’s biggest bank to reject a €1bn share sale agreed with international fund managers and the European Bank for Reconstruction and Development when it comes up for approval next month at an extraordinary general meeting of shareholders.

The intervention is aimed at protecting almost 90,000 “old” shareholders of Bank of Cyprus who took a hit last year when large depositors were forced to convert a sizeable chunk of their savings into shares as part of an international rescue package, and now face further dilution if the private placement goes ahead.

“We have seen mistakes piled upon mistakes and illegalities on top of illegalities (during the bank’s restructuring),” Archbishop Chrysostomos, head of the (eastern) Orthodox Church of Cyprus, told state radio on Tuesday.

“All Bank of Cyprus shareholders, old and new, are called on to vote against the planned capital increase unless the bank agrees to restore the old shareholders along the lines of our proposals,” said the archbishop, who serves on the board of a Bank of Cyprus shareholder pressure group.

The Orthodox church was one of the biggest single shareholders in the bank before the island’s financial collapse, controlling a stake of about 3 per cent and several seats on the bank’s board.

The archbishop is known for his “hands-on” approach to supervising church investments, which range from a controlling stake in the island’s largest brewery to ownership of several luxury hotels as well as large tracts of real estate for development. He has recently been promoting a project to build Cyprus’s largest integrated tourist resort on church-owned land.

Kypros Chrysostomides, legal adviser to the old shareholders, said they wanted the value of their shares to be restored through the recognition of a €1.8bn profit made by Bank of Cyprus from its takeover of Laiki Bank, the island’s second-largest lender which collapsed last year.

“Alternatively, the shareholders could be compensated by being granted property in (Turkish-held) northern Cyprus, which is held at zero value on the bank’s books but could acquire considerable value in the future if there is a settlement,” Mr Chrysostomides said.

Cyprus was split into separate Greek Cypriot and Turkish Cypriot republics following a Turkish military intervention in 1974, prompted by a coup aimed at uniting the island with Greece. While reunification talks have made little progress, cross-border property deals have gradually become more frequent.

The €1bn share sale agreed on Monday is designed to shore up the bank’s capital ratio ahead of this year’s European asset quality review and stress tests. Along with the EBRD, buyers included US hedge funds and private equity investors that participated in Greek bank recapitalisations carried out earlier this year.

Mr Chrysostomides said the old shareholders faced “a second equally unacceptable dilution” as the new shares would be sold at €0.24 each, compared with the €1 price at which the bail-in of depositors took place last year.

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