The Cyprus bailout shows banks can be wound down despite difficulties, European Central Bank (ECB) policymaker Jens Weidmann said in an interview broadcast on Sunday, adding the situation on the island had stabilized.
Weidmann, chief of Germany’s Bundesbank, told Deutschlandfunk radio he wouldn’t rule out that Cyprus might need yet more liquidity, but stressed it was longer term structural reforms that would solve Nicosia’s problems and not more cash.
To secure a 10 billion euro EU/IMF bailout last month, Cyprus forced heavy losses on wealthier depositors. Initially it had also pledged to introduce a levy on deposits of less than 100,000 euros before reneging in the face of protests.
The agreement also includes the winding down of the island’s second-largest bank Cyprus Popular Bank.
“It is important to draw the lesson from Cyprus that banks can be wound up, despite all the difficulties along the way in working out the programme. This is a positive signal, and should help limit uncertainty,” he said.