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Financials

UPDATE 1-Russians, including Putin ally, join bailed-in Bank of Cyprus board

* Russians sizeable minority on Cyprus bank board

* Bank of Cyprus depositors lost heavily in bailout (Adds appointments of chairman and Putin ally being appointed vice chairman)

NICOSIA, Sept 10 (Reuters) - A Cypriot bank which seized depositors savings in March to survive appointed its new directors on Tuesday, giving a key post to a former KGB official who is an ally of Russian President Vladimir Putin.

Shareholders of Bank of Cyprus elected new directors to reflect a new ownership structure at the bank, which converted large deposits to equity to save it from collapse in March.

The bank’s board of 16 individuals now includes six non-Cypriots, mostly Russians, representing individuals who lost considerable amounts of money in the forced conversion to equity of 48.5 percent of deposits exceeding 100,000 euros ($132,700).

One of them, Vladimir Strzhalkovsky, nominated by local company Bolestone Trading Ltd, is the former CEO of Norilsk Nickel, the world’s largest nickel and palladium producer. His ties to Putin date back to the days they both served in the KGB.

At a later board meeting, directors voted to appoint Cypriot Christis Hassapis chairman, and Strzhalkovsky vice chairman. Hassapis, a professor of economics, was nominated by the bank’s employees’ pension fund.

Strzhalkovsky received a $100 million payoff package when he stepped down from Norilsk Nickel in late 2012.

Cyprus teetered on the brink of financial meltdown in March as it debated onerous terms of a bailout with international lenders from the EU and the IMF.

One of the main criticisms from European paymaster Germany at the time was that the island could be a conduit for money laundering from Russia because of close business ties.

Bank of Cyprus was one of two Cypriot banks deeply affected by a 10 billion euro bailout from international lenders.

The second bank, Laiki, was wound down. Large depositors in that bank saw amounts exceeding 100,000 seized and what remained was merged with Bank of Cyprus.

The cash-grab was unprecedented in the history of the euro zone debt crisis.

Anger from shareholders at the annual general meeting was evident, though mostly from old shareholders who saw their equity holdings diluted rather than individuals whose cash was converted to fresh equity.

“The Greeks, the Irish, the Spanish and the Portuguese got cash for their banks. When our turn came they told us to slit our necks,” said Stelios Bekris, a shareholder.

Turnout was smaller than expected, with only 53 percent of shareholders present. ($1 = 0.7538 euros) (Reporting by Michele Kambas; Editing by Alison Williams)

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