Big depositors in Greek Cyprus’ banks may lose 40 percent

NICOSIA/LONDON - Reuters

Greek Cypriot students shout slogans to protest the EU bailout plan that was signed by Greek Cyprus on March 25, as they stand at the entrance of the presidential palace in capital Nicosia.AP photo

Greek Cyprus’s Finance Minister Michael Sarris said yesterday that big depositors, which have more than 100,000 euros in their accounts, in Greek Cypriot banks could lose about 40 percent of their deposits as part of a 10-billion euro international rescue plan.

“It could be in that neighborhood but I do not want to anticipate it,” Sarris told BBC radio, adding the exact figure was yet to be decided. “But what I have seen suggests a number in that neighborhood.”
He has also confirmed that Greek Cypriot depositors with less than 100,000 euros in their accounts “will not be hit.”

However, Andreas Artemis, the chairman of Greek Cyprus’ biggest commercial bank, the Bank of Cyprus, has submitted his resignation, a source at the bank said yesterday. “He sent a resignation letter this morning which will be examined by the Board of Directors convening this afternoon.”

Thousands of students protested in the capital as banks stayed shut to stop a run on deposits after the island agreed a painful bailout to avert bankruptcy. Around 3,000 high school students protested outside parliament, the first real expression of popular anger after Greek Cyprus agreed the 10 billion euro bailout with the EU.

‘Capital controls to last for a matter of weeks’

Sarris said capital controls to prevent big outflows of cash from the island would probably last for a matter of weeks. “I think we are talking a matter of weeks. That would be my sense,” he added.
He said he was confident that outflows would be more controlled as progress was made on implementing an international bailout deal for Greek Cyprus.

The final size of the loss faced by investors will depend on how the government decides to protect pensions, Sarris said.

He confirmed that all Greek Cypriot banks will remain closed until tomorrow and that capital controls will be placed on the size and the amount of money people will be allowed to withdraw once the banks have reopened.

Meanwhile, the banking crisis in Greek Cyprus was a unique case and the rescue plan used should not be seen as a model for other European countries that fall into trouble, ECB Executive Board member Benoit Coeure said yesterday.

Banks have not been open since 15 March. Their reopening had been expected after Greek Cyprus agreed a deal with the IMF and the EU that releases 10 billion euros in support.

It was conditional on Greek Cyprus itself raising 5.8 billion euros, most of which looks likely to come from depositors with more than 100,000 euros in Bank of Cyprus and Laiki or Popular Bank.