30 Mar 2013

Bank of Cyprus savers ‘could lose up to 60 per cent’

Bank of Cyprus savers with more than 100,000 euros (£85,000) could face losing up to 60 per cent, central bank and finance ministry officials say.

They said deposits over 100,000 euros at the country’s largest lender will lose 37.5 per cent of their value after being converted into bank shares.

The officials also said they could lose up to 22.5 per cent more, depending on an assessment by officials who will determine the exact figure aimed at restoring the troubled bank back to health.

Government figures, including finance minister Michalis Sarris and central bank governor Panicos Demetriades, had previously indicated that depositors in the island’s largest lender would lose around 40 per cent of their uninsured savings as part of an 11th hour agreement reached in Brussels in the early hours of Monday.

Meanwhile, account holders in Laiki Bank, the country’s second largest, stand to lose up to 80 per cent of their money as the lender is wound down and insured deposits transferred to Bank of Cyprus.

Measures will provoke further anger

The harsher-than-expected terms on the Bank of Cyprus’ largest depositors will provoke further anger among Cypriots, who face sharp economic decline with the contraction of their dominant banking sector.

For almost two weeks, Greek Cypriots were on a ration of limited withdrawals from bank cash machines. Even with banks now open, they face a regime of strict restrictions designed to halt a flight of capital from the island.

On Friday, easing a ban on cheque payments, Cypriot authorities said cheques could be used to make payments to government agencies up to a limit of 5,000 euros. Anything more than 5,000 euros would require Central Bank approval.

The bank also issued a directive limiting the cash that can be taken to areas of the island beyond the “control of the Cypriot authorities” – a reference to Turkish-controlled northern Cyprus which considers itself an independent state. Cyprus residents can take 300 euros; non-residents can take 500.