Bank of Cyprus 'Haircut' Much Tougher than Feared

World | March 30, 2013, Saturday // 17:23
Bulgaria: Bank of Cyprus 'Haircut' Much Tougher than Feared A man sits in front of an automated teller machine outside the National Bank of Cyprus, which closed for two weeks, on Wednesday in Nicosia. Photo by Getty Images

The central bank of Cyprus has spelled out the terms of the "haircut" that Bank of Cyprus depositors holding more than 100,000 euros must take as part of an international bailout deal.

Some 37.5% of holdings above 100,000 euros will become bank shares.

A further 22.5% will go into a fund attracting no interest and may be subject to further write-offs.

The other 40% will attract interest but this will not be paid unless the bank performs well.

Cypriot officials had previously said that large savers at Laiki — which would be absorbed in to the Bank of Cyprus — could lose as much as 80%.

But they had said large accounts at the Bank of Cyprus would lose only 30 to 40%.

Cyprus needs to qualify for a EUR 5.8 B EU-IMF bailout restructuring move.

Cyprus has become the first eurozone member country to bring in capital controls as its banks reopened on Thursday amid tough curbs.

The move is highly controversial and foreign correspondents are unanimous that the restrictions on the free movement of capital represent a profound breach of an EU principle.

However, the European Commission on Thursday justified the move, saying the "stability of financial markets and the banking system in Cyprus constitutes a matter of overriding public interest".

But it added that "the free movement of capital should be reinstated as soon as possible".

The vice-president of the Cypriot Employers Federation, Demetria Karatoki, told the BBC he believed the country could pull through.

"Although there is going to be hardship, at the end of the day we can start rebuilding our economy on a sound basis," he said.

The ordinary people however say they no longer trust politicians and fear that all the business in Cyprus will soon collapse.

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