Update on Cyprus economic situation

Eurozone finance ministers have agreed over the weekend a deal on a EUR 10 billion bailout for Cyprus to prevent its banking system collapsing and keep the country in the eurozone. As part of the deal a significant downsizing of the banking sector shall be affected almost immediately.

All deposits up to EUR 100.000 will be "fully guaranteed". The ‘Resolution’ of Laiki Bank will go ahead splitting the Bank into a ‘Good’ and a ‘Bad’ Bank. The Good Bank will keep deposits under EUR 100.000 as well as good/performing loans. The Bad Bank will keep the amounts from deposits over EUR 100.000 plus the bad /non-performing loans. The Good Laiki Bank is expected to be merged with the Bank of Cyprus.

What does this mean for depositors at Laiki Bank: Deposits below EUR 100.000 will not be affected. Amounts over EUR 100.000 will be transferred to the Bad Laiki Bank. Depending on the amounts to be recovered from the loans receivable assigned to the Bad Bank, the depositors are expected to be compensated accordingly.

What does this mean for depositors at the Bank of Cyprus: Deposits below EUR 100.000 will not be affected. There will be a haircut on amounts above EUR 100.000 to the extent of 30% approximately, although the exact haircut percentage has not as yet been decided. Such amounts are expected to be converted to shares in the Bank of Cyprus.

Depositors at the remaining financial institutions of Cyprus are not expected to be affected at this stage.

Existing current accounts with amounts under 100,000 Euro should be operable from Thursday 28th March 2013 subject to capital controls .