Bank of Cyprus big depositors could lose up to 60%
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Bank of Cyprus big depositors could lose up to 60%

Bank of Cyprus big depositors could lose up to 60%

30 March 2013

 

Bank of Cyprus depositors with more than 100,000 euros (£84,300; $128,200) could lose up to 60% of their savings as part of an EU-IMF bailout restructuring move, officials say.

 The central bank says 37.5% of holdings over 100,000 euros will become shares.

 Up to 22.5% will go into a fund attracting no interest and may be subject to further write-offs.

A man walks near a Bank of Cyprus branch in Nicosia. Photo: 28 March 2013
Banks in Cyprus opened on Thursday – for the first time in nearly two weeks

 

The other 40% will attract interest – but this will not be paid unless the bank performs well.

 

It was known that the wealthiest savers at the Bank of Cyprus would take a large hit from the bailout deal – but not to this extent, the BBC’s Mark Lowen reports.

 

Cypriot officials have also said that big depositors at Laiki – the country’s second largest bank – could face an even tougher “haircut”. However, no details have been released.

 

The officials say that Laiki will eventually be absorbed into the Bank of Cyprus.

 

Much of the recent focus has been on wealthy foreign savers – mainly Russians – who will lose a vast chunk in the bailout deal.But there are plenty of Cypriot depositors, too, who will be hard hit and even more so now than previously thought.Before leaving Cyprus, I visited the Junior and Senior School of Nicosia, which teaches the British system to 900 children.

School fees are paid into Laiki Bank, taking its deposits well over 100,000 euros. With huge losses, it will now struggle to pay staff salaries.

Those who recently invested proceeds from house sales will also suffer. There’s talk of one university with a 6m-euro EU grant in its account.

The Bank of Cyprus holds about a third of all deposits in Cyprus. An enforced loss of up to 60% will have a dramatic impact.

And other indebted eurozone countries will fear this sets a precedent and that they might be next.

 

The fear is that once the unprecedented capital controls – which are in place of an indefinite time – are lifted, the wealthiest will rush to move their deposits abroad, our correspondent says.

 

He adds that the larger than expected loss could also have devastating consequences for large depositors such as schools and universities. And it could spread fear in other indebted eurozone countries that Cyprus might set a precedent.

‘Loans written off’

Cyprus needs to raise 5.8bn euros to qualify for the bailout, and has become the first eurozone member country to bring in capital controls to prevent a torrent of money leaving the island and credit institutions collapsing.

 

The original 10bn-euro bailout deal was agreed in Brussels earlier this month. It placed a one-off tax on all customers of Cypriot banks, starting at 6.75% for the smallest deposits.

 

But this led to mass protests across Cyprus, and the deal was later voted down by the country’s parliament. MPs later backed a revised deal.

 

Cypriot President Nicos Anastasiades has said the financial situation has been “contained” following the deal.

 

He has also stressed that Cyprus has no intention of leaving the euro, stressing that “in no way will we experiment with the future of our country”.

Continue reading at BBC News – Bank of Cyprus big depositors could lose up to 60%.

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