NICOSIA--Uninsured depositors of Cyprus Popular Bank PCL
(CPB.CP), also known as Laiki Bank locally, could lose up to 40% of
their savings if the government proceeds with a proposed
restructuring plan to split its assets into good and bad as part of
efforts to unlock aid from international lenders and reopen its
banking system, European and Cypriot officials with knowledge of
the plan said Friday.
The bank's resolution would reduce by 3.6 billion euros ($4.65
billion) the EUR5.8 billion that Cyprus has been asked to raise on
its own to secure a EUR10 billion bailout from the euro zone and
the International Monetary Fund, another official said.
The Cypriot government rushed to parliament late Thursday a
range of draft bills regulating the resolution of banks and
introducing restrictions on financial transactions to stem
potential outflows once the banks reopen. The proposals will allow
authorities to restrict noncash transactions, freeze check cashing,
limit withdrawals and even convert checking accounts into fixed
term deposits.
One of the officials said these measures could be in place "for
months."
Two European officials said it was imperative that Cypriot
lawmakers pass Friday two bills outlining capital-control measures
and the bank-resolution process to allow the country's banks to
reopen Tuesday as scheduled. The bills were expected to be debated
in parliament later Friday. The banks have been closed since March
16 when Cyprus agreed on a EUR10 billion bailout from the EU and
the IMF that would have seen all deposits taxed with a one-off
levy. But the plan was met with furious public opposition and was
rejected earlier this week by Cyprus' parliament.
"Without these measures in place we're looking at an instant
bank run. There's no way depositors won't try to move cash out and
restoring some confidence could take months," one European official
said.
Write to Matina Stevis at matina.stevis@dowjones.com
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