Cypriot Bank Depositors Could lose up to 8.3 billion

Large depositors who kept their money in the two biggest Cypriot banks stand to lose up to 8.3 billion euros through the restructuring of the two institutions, a European Commission document showed.

It is part of an estimated total 10.6 billion contribution from investors for restructuring the Cypriot banking sector, which also includes wiping out shareholders and bondholders in Laiki, or Popular, Bank as well as imposing losses on junior bondholders in the Bank of Cyprus and a deposit-for-equity swap

The Mediterranean island will close Laiki, its second biggest bank, and restructure its biggest, Bank of Cyprus, in return for an international loan of 10 billion euros over three years, without which Cyprus would be unable to pay its debts.

Cyprus and international lenders decided that depositors who had more than 100,000 euros in the two banks will lose some of their money to contribute to the recapitalization of the institutions, along with shareholders and bond holders.

Deposits of up to 100,000 euros are guaranteed.

“The bail-in of uninsured depositors of Laiki and Bank of Cyprus will provide an estimated contribution to recapitalization of 8.3 billion euros,” the document, dated April 12 and marked “final” said.

In a footnote, it added: “This is a maximum estimate. The final amount will depend inter alia on the conversion under the debt-for-equity swap in Bank of Cyprus and the recoveries of Laiki Bank.”

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza