Cyprus' Big Depositors May Lose 60% of Savings

World | March 31, 2013, Sunday // 12:28|  views

On Thursday, banks in Cyprus opened for the first time in nearly two weeks. Photo by EPA/BGNES

Bank of Cyprus depositors with more than EUR 100 000 could lose up to 60% of their savings as part of an EU-IMF bailout restructuring move.

The news was reported Sunday by BBC, citing local officials.

Large depositors in the Bank of Cyprus will get back 37.5% of their money in shares instead of cash, but they may be worth nothing, analysts have warned.

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

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

The move is the part of the painful Cyprus rescue package, but analysts say the shares offered are "near worthless".

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 plan is for Laiki to be eventually absorbed into the Bank of Cyprus.

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

He adds that the larger than expected loss could also have devastating consequences for large depositors such as schools and universities.

Cyprus needs to raise EUR 5.8 B to qualify for the bailout, and has become the first Eurozone member country to bring in capital controls to prevent mass torrents of money leaving the island and credit institutions collapsing.

The original EUR 10 B 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.

The move led to mass protests across Cyprus, and the deal was later voted down by the country's Parliament. MPs later backed a revised deal.

On Thursday, banks in Cyprus opened for the first time in nearly two weeks. Long lines were reported as people tried to access their money, but the mood was generally calm and by Friday the banks returned to normal.

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Tags: IMF, ECB, Eurozone, Russian, Nicos Anastasiades, president, cypriot, Cyprus, bailout package, levy, banks, bank, European Union, euro, Russia, loan, Laiki, bank of cyprus


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