In March this year it was agreed that depositors with over 100,000 Euros deposited in the Bank of Cyprus would lose 37.5% of their cash – see earlier article. This would be converted into class A shares in order to recapitalise the bank as part of the bailout agreement between the Republic of Cyprus and the IMF. The same agreement decreed that a further 30% of uninsured deposits would be held by the bank pending further analysis and independent valuations of the bank’s assets, with a final decision to be made on these reserved funds by July 2013.
All the reviews and negotiations between the South Cyprus government, the Central Bank of Cyprus and international lenders have now been concluded and the final agreed figure for the haircut is 47.5%. This means that savers will lose a further 10% of their savings.
The Deputy Government Spokesman, Victoras Papadopoulos, has said that this strict implementation of the Memorandum of Understanding Cyprus is the only way to bring a swift end to the financial crisis and that it will lead to a “hopeful stabilisation of the situation”.
The Cyprus Popular Bank, which was also required to implement the original haircut, has now been wound down and its assets and insured deposits have been absorbed by the Bank of Cyprus. A major consolidation activity is currently underway to integrate the bank.