The holders of the deposits in the Bank of Cyprus and Laiki Bank are to lose up to 8.3 billion euros in the result of the government restructuring of the institutions, Reuters reported citing the latest estimates of the European Commission.
According to Cyprus Mail, the process of restructuring will weigh on small customers and shareholders of both organizations, resulting in overall losses of 10.5 billion euros.
Under the reform, Bank of Cyprus will merge with potentially profitable assets of Laiki Bank followed by charging over a third of funds from the bank accounts holding a hundred thousand euros. The part of large deposits will be converted into Bank of Cyprus shares. Another part of deposits will be frozen. As a result, bank account holders will be able to use only 10% of their deposits. The deposits less than one hundred euros will not be affected.
The Cyprus banking system is largely driven by foreign depositors, including the Russians. Itar-Tass news service said citing local lawyer Chrysis Sofocleous that over one hundred Russian customers of Bank of Cyprus and Laiki Bank are about to file lawsuits against Cyprus government over the banking system restructuring. However, he did not specify the names.
The banking sector reform is the major requirement to get financial assistance from international creditors, including the International Monetary Fund, European Central Bank and the European Commission. At the same time, the EC estimated the amount of funds necessary for Cyprus to back its economy till 2016 at 23 billion euros.