Under the arrangement, depositors in Bank of Cyprus will receive shares in the lender worth 37.5pc of any savings over €100,000, while the rest may never be paid back, according to a statement from the Cypriot central bank.
Of the 62.5pc of uninsured deposits not converted to bank shares, about 40pc will continue to accrue interest but will not be repaid unless the bank does well, while the final 22.5pc will cease to attract interest.
Government figures, including finance minister Michalis Sarris and central bank governor Panicos Demetriades, had previously indicated that depositors in the island\’s largest lender would lose around 40pc of their uninsured savings as part of an 11th hour agreement reached in Brussels in the early hours of Monday.
Meanwhile, account holders in Laiki Bank, the country\’s second largest, stand to lose up to 80pc of their money as the lender is wound down and insured deposits transferred to Bank of Cyprus.
I\’m not really sure how these numbers stack up.
From the original numbers they needed to find €6 billion or so to prop up the banks. There\’s €30 odd billion in accounts over €100,000. Thus the haircut shouldn\’t need to be that large. 20% or so would see it right.
However, those are the numbers for the entire banking system. And now they\’re only resolving the two main banks, the two which are actually bust. And I suppose it\’s possible that the two bust banks were the two retail banks. It\’s the other banks that have been catering to the offshore big hitters with the large deposits. They\’re not bust, they don\’t need resolving, but that\’s also where most of the large deposits are.
That\’s all supposition of course but it does explain the observable facts. And that leads to a very interesting outcome as well.
That means that it wasn\’t Cyprus\’ home for hot Russian money that was the problem. They\’re not the banks that went bust. What did go bust was the plain vanilla domestic banking system. Largely by putting all the depositors cash into Greek Government bonds. And that would be very interesting indeed, wouldn\’t it?
So, does anyone know where one can find the actual figures for deposits? By bank? Can we see how much Laiki and B of Cyprus had in those large offshore deposits? As I say, if the haircuts have to be this large to raise the €6 billion then those large deposits can\’t have been all that large. But is it possible to find out?