Bank of Cyprus savers could lose up to 60%
- Published: 29/03/2013 at 04:49 PM
- Online news:
Big savers in Cyprus's largest bank face losses of up to 60 percent, far greater than originally feared under the island's controversial EU-led bailout plan, officials said on Saturday.
People queue up outside a branch of the Cyprus Popular Bank, Laiki, in Nicosia, on March 29, 2013. Big savers in Cyprus's largest bank face losses of up to 60 percent, far greater than originally feared under the island's controversial EU-led bailout plan, officials said on Saturday.
Cyprus meanwhile launched an investigation into a list published in Greek newspapers of Cypriot politicians who allegedly had loans written off by two banks at the heart of the financial meltdown.
Bank of Cyprus savers will see at least 37.5 percent of funds over 100,000 euros ($128,000) turned into shares, and a further 22.5 percent will be held until authorities know they can satisfy the terms of the bailout, the central bank said.
Under the first eurozone rescue package to punish savers with a "haircut" of their money, Cyprus can only qualify for the 10-billion-euro ($13-billion) loan by finding 5.8 billion euros of its own.
"The first estimate has been that 37.5 percent of deposits over 100,000 will be converted into shares," Finance Minister Michalis Sarris told reporters.
"To be sure -- once all the calculations have been made on how much capital is needed -- 22.5 percent has been put to one side," he added.
The central bank said that the final decision on the percentage that needed to be deducted would be made "not later than 90 days from the completion of the valuation" and the remainder would be returned to the depositor.
Asked whether the loss rate could be as high as 60 percent, senior Bank of Cyprus official Mario Skandalis told AFP: "It could be a possibility but I would say it is a remote possibility."
The size of the levies will be a further blow to both Cypriots and foreign investors -- particularly Russians -- with large sums in the island's bloated offshore banking sector.
It will also alarm other struggling eurozone members who fear the "troika" of the European Union, European Central Bank and International Monetary Fund could demand similar terms for future bailouts.
Bank of Cyprus is set to absorb what is salvaged from the island's second largest lender Laiki under the deal, while the rest of it will be wound up with the loss of thousands of jobs.
The finance minister said that Laiki branches in Britain, Romania, Russia, Serbia and Ukraine will be sold off.
A panel appointed by Anastasiades will investigate a list published by Greek media of Cypriot politicians who allegedly had loans forgiven during the meltdown, Justice Minister Ionas Nicolaou said.
The president will swear in the commission of three supreme court judges on Tuesday with a deadline of three months to report back, Nicolaou said, while a committee of lawmakers will also look at the claims.
Bank of Cyprus, Laiki and third largest lender Hellenic Bank reportedly forgave millions of euros in loans over the past five years to lawmakers, companies and local authorities, newspapers in Greece said.
The finance minister said that some loan write-offs were part of normal banking practice. "Banks from time to time make choices on whether or not they get back the loan amount agreed," Sarris said. "These things are not unusual."
Cypriots are meanwhile hoping authorities further ease capital controls -- the first in the eurozone's history -- which were imposed to stop a run on banks when they reopened on Thursday after a 12-day shutdown.
The reopening went smoothly, and the central bank on Friday lifted all limits on domestic card payments while saying it would make daily efforts to "refine or relax" the curbs.
Draconian controls remain in place, including a daily withdrawal limit of 300 euros and a ban on taking more than 1,000 euros in cash out of the country.
At the island's main international airport in Larnaca, improvised signs in Greek, English and Russia warned departing travellers of the restrictions.
Monday will be the third public holiday in a row as Greek Cypriots mark the anniversary of the launch of an armed uprising against British colonial rule in 1955.
But the sense of solidarity as Cyprus faces its greatest crisis since Turkish troops occupied the north of the island in 1974 remains strong.
The phone company Cyta said domestic calls from fixed lines would be free in April while the government said it was looking for a way to lower the island's high electricity costs.
About the author
- Writer: AFP
Position: News agency