March 24, 2013 / 11:41 PM / 5 years ago

Draft deal reached to rescue Cyprus, shut a bank - sources

BRUSSELS, March 25 (Reuters) - Cyprus’s president and the European Union have agreed the outlines of a rescue deal that would see the creation of a “good bank” and a “bad bank” and include the shutting down of Cyprus’s second largest lender, EU sources said.

The draft proposal was agreed by Cypriot President Nicos Anastasiades in negotiation with European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso. The plan will now be presented to euro zone finance ministers for discussion, the officials said.

Two sources said the proposal involved shifting deposits below 100,000 euros from the Popular Bank of Cyprus (also known as Laiki) to the Bank of Cyprus to create a “good bank”.

Uninsured deposits -- those above 100,000 euros -- would be held and would face a heavy levy, the officials said, and the bank would then effectively be shuttered. It was not immediately clear how big the levy would be.

The Bank of Cyprus would also assume all of the emergency lending that Popular Bank has taken on from the European Central Bank, which totals 9 billion euros. That would leave the Bank of Cyprus with total ELA exposure of 10 billion, the source said.

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