Cyprus and its international lenders on Monday reached a last-minute rescue deal to resolve the country's financial crisis.
The proposal includes a levy on uninsured deposits over 100,000 euros in the Popular Bank of Cyprus, known as Laiki, the country's second biggest bank, which is set to be wound down. The deal is expected to contribute around 4.2 billion euros (US$5.5 billion) towards the Cyprus rescue package, Jeroen Dijsselbloem, president of the Eurogroup said.
Deposits below 100,000 euros in Laiki will be protected and moved to the Bank of Cyprus, the country's largest bank.
Depositors in Bank of Cyprus stand to lose 30 percent on their holdings over and above 100,000 euros, the chairman of Cyprus' parliamentary finance committee told Irish radio on Monday. "I haven't heard a formal announcement about the haircut, but this is the figure I heard," Reuters cited Nicholas Papadopoulos as saying.
The agency added that the haircut for large depositors in the island's second biggest bank, Laiki, had not yet been disclosed but was expected to be higher.
The plan to secure a 10 billion euro ($13 billion) lifeline from international lenders, the European Union, the European Central Bank and International Monetary Fund, came just hours before a deadline to avert a collapse of the Cypriot banking system.
The proposal, approved by euro zone finance ministers, will involve setting up a "good bank" and a "bad bank."
"I would like to emphasize that none of these measures will affect deposits below 100,000 euros there should be no doubts about that," Dijsselbloem said at a press conference in Brussels. "We reaffirm that importance of fully guaranteeing these deposits in the European Union."