Bank of Cyprus to cut 30% off deposits over €100,000

Cyprus banking crisis

Cypriots and foreigners wait in line to withdraw money from an ATM of a Laiki (Popular) Bank branch in the old city of the capital, Nicosia.

Depositors in the Bank of Cyprus, the biggest bank on the island, will reportedly lose 30 percent on their holdings above 100,000 euros, the chairman of the Cypriot parliamentary finance committee said on Monday.

“I haven’t heard a formal announcement about the haircut, but this is the figure I heard,” Irish radio quotes Nicholas Papadopoulos as saying.

At dawn on Monday, Cyprus and the troika of international backers (EU, ECB, IMF) reached agreement on a €10bn bailout plan, aimed at preventing the bankruptcy of the island’s financial system and the country’s exit from the Eurozone.

Under the plan the depositors in Bank of Cyprus will be compensated with equity in the bank, while Laiki Bank, which is the island’s second largest financial institution, will be closed down.

Those with deposits under 100,000 euros in both banks will continue to enjoy the protection of the state’s guarantees, after an earlier proposal to impose a 6.75% tax on them provoked anger.

“I think they continue stealing what’s already been stolen. We need to understand what this story will finally lead to,” Russian Prime Minister Dmitry Medvedev commented on the move during a meeting with his aides.

Banks are due to reopen on Tuesday, however, withdrawal limits will be imposed to avoid a run of capital.

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