Cyprus became the latest euro zone domino to teeter in 2012 just when the worst of the crisis appeared to be over. In March 2013, a compromise rescue plan backed by euro zone finance ministers called for Cyprus to wind down one largely state-owned bank, Popular Bank. The raid on Popular Bank was intended to raise most of the 5.8 billion euros that Cyprus was required to raise as part of the bailout.
Big Cyprus savers could lose 60pc
Some money to be converted to shares under €10b EU bailout, but another portion held
Agence France-Presse in Nicosia
Big savers in Cyprus' largest bank face losses of up to 60 per cent, far greater than originally feared under the island's controversial European Union-led bailout plan, officials said yesterday.
Lawmakers were meanwhile investigating a list published in Greek newspapers of Cypriot politicians who allegedly had loans written off by the island's three biggest banks, two of them at the heart of the financial meltdown.
Officials said Bank of Cyprus savers will see at least 37.5 per cent of funds over €100,000 turned into shares, but a further 22.5 per cent will be held until authorities know they can satisfy the terms of the bailout.
Under the first euro zone rescue package to punish savers with a so-called haircut of their money, Cyprus can qualify for the €10 billion (HK$100 billion) loan only by finding €5.8 billion of its own.
"There will be a 37.5 per cent haircut on deposits over €100,000 that will be converted into shares," said Marios Mavrides, a lawmaker from the ruling Democratic Rally (DISY) party. "Then 22.5 per cent will be held from the account for about two or three months, but this sum might be lower if a bigger haircut is needed."
Senior Bank of Cyprus official Mario Skandalis confirmed the figures.
Asked whether the rate that savers with deposits of more than €100,000 will lose could be as high as 60 per cent, he replied: "It could be a possibility, but I would say it is a remote possibility."
He said he expected a formal announcement on the matter by tomorrow.
House finance committee chairman Nicolas Papadopoulos told state radio there were questions over the possible extra levy on the held-back 22.5 per cent, and said a lack of information had created panic among depositors in the country.
The streets of Nicosia were filled with crowds relaxing in its cafes and bars yesterday, but popular anger was not hard to find.
There are no signs for now that bank customers in other struggling euro zone countries like Greece, Italy or Spain are taking fright at the precedent set by the bailout.
"Cyprus is, and will remain, a special, one-off case," German Finance Minister Wolfgang Schaeuble told German mass-selling daily Bild. "Savings accounts in Europe are safe."
Mavrides, meanwhile, confirmed that a committee appointed by President Nicos Anastasiades would investigate a list published by Greek media of Cypriot politicians who allegedly had loans forgiven.
The Bank of Cyprus, Laiki and Hellenic Bank reportedly forgave millions of euros in loans over the past five years to lawmakers, companies and local company authorities, newspapers in Greece said.
Additional reporting by Reuters