Cyprus and EU agree draft proposal to rescue banks

BRUSSELS Sun Mar 24, 2013 7:58pm EDT

1 of 3. Anti-Troika protesters hold a 'Hands off Cyprus' banner during a demonstration outside the EU offices in Nicosia March 24, 2013.

Credit: Reuters/Yannis Behrakis

BRUSSELS (Reuters) - Cyprus, the European Union and the International Monetary Fund have agreed a new plan to resolve the island's bank and finance a rescue of the country, an EU official said early on Monday.

The proposal, which will now be presented to euro zone finance ministers for discussion, will involve setting up a "good bank" and a "bad bank" and will mean that Popular Bank of Cyprus, known as Laiki, will effectively be shut down.

Deposits below 100,000 euros in Laiki will be transferred to Bank of Cyprus. Deposits above 100,000 euros, which under EU law are not insured, will be frozen and will be used to resolve debt. It remains unclear how large the writedown on those funds will be.

The EU spokesman said there would be no "levy" imposed on any Cypriot banks, with the package requiring a full "bail-in" of uninsured depositors, which is likely to mean heavy losses for those with large holdings in Laiki and potentially Bank of Cyprus, where many Russians hold bank accounts.

(Reporting by Annika Breidthardt and Jan Strupczewski; Writing by Luke Baker)

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Comments (23)
Harry079 wrote:
The really rich people don’t go out on the streets to protest. They will pay someone to register their complaints for them. Usually in a manner that isn’t to healthy for the recipients.

Mar 23, 2013 9:01pm EDT  --  Report as abuse
kommy wrote:
Cyprus will pull Greece, Greece will topple eurozone.

Mar 23, 2013 9:40pm EDT  --  Report as abuse
nixonfan wrote:
Talks broke up? No deal yet? Cyprexit?

Mar 23, 2013 10:20pm EDT  --  Report as abuse
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