Nicosia: Big savers in Cyprus's largest bank face losses of up to 60 percent, far greater than originally feared under the island's controversial EU-led bailout plan, officials said on Saturday. (Agencies)
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 percent of funds over 100,000 euros turned into shares, but a further 22.5 percent will be held until authorities know they can satisfy the terms of the bailout. Under the first eurozone rescue package to punish savers with a so-called "haircut" of their money, Cyprus can only qualify for the 10-billion-euro (USD 13-billion) loan by finding 5.8 billion euros of its own.
"There will be a 37.5 percent haircut on deposits over 100,000 euros that will be converted into shares," said Marios Mavrides, a lawmaker from the ruling Disy party. "Then 22.5 percent will be held from the account for about two or three months, but this sum might be lower if a bigger haircut is needed," Mavrides said.
Senior Bank of Cyprus official Mario Skandalis confirmed the figures. "There was a preliminary level reached which was 37.5 percent but this has not been finalised yet," he said, adding that if the required amount for the bailout "cannot be reached then we will change the haircut rate."
Asked whether the rate that savers with deposits of more than 100,000 euros will lose could be as high as 60 percent he replied, "It could be a possibility but I would say it is a remote possibility." He expected a formal announcement by Monday.
Lawmaker Mavrides said the remaining 40 per cent would be "placed in a time deposit for about six months to prevent people drawing all their money out but it creates a problem for businesses who have no access to working capital." "The money is not lost but creates a problem for businesses."
House finance committee chair 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. The bailout takes the axe to Cyprus's prized tax-haven style banking system -- bloated with Russian money and exposed to toxic Greek debt -- and also threatens to deepen the recession the island was already suffering.
Bank of Cyprus is set to absorb the island's second largest Laiki under the deal with the European Union, European Central Bank and International Monetary Fund. Laiki will be wound up with the loss of thousands of jobs.
Lawmaker 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.
Nicosia: Big savers in Cyprus's largest bank face losses of up to 60 percent, far greater than originally feared under the island's controversial EU-led bailout plan, officials said on Saturday.