Wednesday 27 March 2013

Cyprus - Huge losses for uninsured depositors

Cyprus Finance Minister: Uninsured Laiki Depositors Could Face 80% Haircut

26 January, 2013

Cyprus's finance minister said Tuesday that large deposit holders at Cyprus Popular Bank PCL (CPB.CP), the island's second biggest lender, could face losses of as much as 80% on their deposits as the government moves to wind down its operations.

Speaking in a television interview with state broadcaster RIC, Michalis Sarris indicated that it could also take years before those depositors see any of their money returned.

"Realistically, very little will be returned," Mr. Sarris said.

Asked if, like in other bank closures, it could take six to seven years before depositors get back there money, he said: "maybe yes. And the amount [returned], could be 20%. Certainly, for depositors above 100,000 euros it could be a very significant blow."

His remarks come just hours after Cyprus's central bank governor estimated that the losses facing large depositors at rival Bank of Cyprus PCL (BOCY.CP), could reach as much as 40%.

Early Monday, Cyprus agreed to a 10 billion euro ($13 billion) bailout from its euro-zone peers and the International Monetary Fund in exchange winding down Cyprus Popular, also known as Laiki, and the merger of its healthy assets with Bank of Cyprus.

Cyprus's banks have been closed since March 16 and are scheduled to remain closed Wednesday as the country raced to complete a deal on the aid package and avert a meltdown in the island's financial sector. Mr. Sarris said the banks would reopen Thursday, as scheduled.

Fearing a mass exodus of deposits when they do, the government of Cyprus is preparing to implement capital controls--the first euro-zone member to do so--to keep money from rushing out of the country. Mr. Sarris said he expected a decree implementing those capital controls to be ready by midday Wednesday.

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