Cyprus details huge losses for major bank clients under bailout
Source: Agencies |
April 1, 2013, Monday
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MAJOR depositors in Cyprus's biggest bank will lose around 60 percent of savings over 100,000 euros, its central bank confirmed on Saturday, sharpening the terms of a bailout that has shaken European banks but saved the island from bankruptcy.
Initial signs that big depositors in Bank of Cyprus would take a hit of 30 to 40 percent - the first time the eurozone has made bank customers contribute to a bailout - had already unnerved investors in European lenders last week.
But the official decree published on Saturday confirmed a Reuters report a day earlier that the bank would give depositors shares worth just 37.5 percent of savings over 100,000 euros. The rest of such holdings might never be paid back.
The toughening of the terms sends a clear signal that the bailout means the end of Cyprus as a hub for offshore finance and could accelerate economic decline on the island and bring steeper job losses.
Banks reopened to relative calm on Thursday after the imposition of the first capital controls the euro has seen since it was launched a decade ago.
The streets of Nicosia were filled with crowds relaxing in its cafes and bars on Saturday, but popular anger was not hard to find.
"Europe shouldn't have allowed this disaster to happen here. Cyprus was paradise and they've turned it into hell," said Tryfonas Neokleous, owner of a clothes shop on a cobbled street in the center of the city.
He said he didn't except business to pick up even now that the banks were open again after an almost two-week shutdown.
"I don't expect anything and I don't hope for anything anymore. People are going to spend their money on food and everything they've been deprived of the last 15 days."
There are no signs for now that bank customers in other struggling eurozone countries like Greece, Italy or Spain 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 daily Bild. "Savings accounts in Europe are safe."
European officials worked hard last week to stress that the island's bailout was a unique case - after a suggestion by Eurogroup chairman Jeroen Dijsselbloem that the rescue would serve as a model for future crises rattled European financial markets.
"Together in the Eurogroup we decided to have the owners and creditors take part in the costs of the rescue - in other words those who helped cause the crisis," said Schaeuble.
Initial signs that big depositors in Bank of Cyprus would take a hit of 30 to 40 percent - the first time the eurozone has made bank customers contribute to a bailout - had already unnerved investors in European lenders last week.
But the official decree published on Saturday confirmed a Reuters report a day earlier that the bank would give depositors shares worth just 37.5 percent of savings over 100,000 euros. The rest of such holdings might never be paid back.
The toughening of the terms sends a clear signal that the bailout means the end of Cyprus as a hub for offshore finance and could accelerate economic decline on the island and bring steeper job losses.
Banks reopened to relative calm on Thursday after the imposition of the first capital controls the euro has seen since it was launched a decade ago.
The streets of Nicosia were filled with crowds relaxing in its cafes and bars on Saturday, but popular anger was not hard to find.
"Europe shouldn't have allowed this disaster to happen here. Cyprus was paradise and they've turned it into hell," said Tryfonas Neokleous, owner of a clothes shop on a cobbled street in the center of the city.
He said he didn't except business to pick up even now that the banks were open again after an almost two-week shutdown.
"I don't expect anything and I don't hope for anything anymore. People are going to spend their money on food and everything they've been deprived of the last 15 days."
There are no signs for now that bank customers in other struggling eurozone countries like Greece, Italy or Spain 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 daily Bild. "Savings accounts in Europe are safe."
European officials worked hard last week to stress that the island's bailout was a unique case - after a suggestion by Eurogroup chairman Jeroen Dijsselbloem that the rescue would serve as a model for future crises rattled European financial markets.
"Together in the Eurogroup we decided to have the owners and creditors take part in the costs of the rescue - in other words those who helped cause the crisis," said Schaeuble.
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