July 28, 2013 5:31 pm
Bank of Cyprus close to depositor deal
Cyprusdepositors, in a sign that the country’s banking crisis has panned out more benignly than feared.ypriot officials are close to finalising the terms of losses for Bank of C
Deposits at the lender in excess of the guaranteed limit of €100,000 would be subject to a 47.5 per cent haircut under the agreement. In March, policy makers had said that 37.5 per cent of deposits would be wiped out with a further 22.5 per cent held in escrow to cover unforeseen needs – raising the prospect of a 60 per cent reduction in depositors’ funds in all.
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However, central bank officials, advisers and politicians were on Sunday close to agreeing that an escrow fund of only 10 per cent would be needed, according to people familiar with the matter. “At this stage, there is tacit approval for a 47.5 per cent total figure,” one person said on Sunday afternoon. “By the end of the day, if all goes well, there should be a formal deal.”
Another official cautioned the final details would not be hammered out before Monday.
Officials, who were keen to keep the total below 50 per cent, remained cautious about the timetable for returning depositors’ money. Limits have applied to account withdrawals since the spring.
So far, only 10 per cent of funds has been returned to account holders in cash.
The remaining balance of 42.5 per cent could take months to free up, however, as policy makers wrangle over the details. Some are arguing that deposits should be released in the form of securities that would count towards bank capital.
The improving fate of Bank of Cyprus, which is absorbing the “good” part of rival Laiki, contrasts with an expected funding shortfall at the rump of Laiki, which is being wound up.
Additional reporting by Kerin Hope
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