By Alex Brittain
LONDON--Large depositors at Cypriot banks could lose as much as
40% of their funds as part of bailout for the crisis-hit euro-zone
nation, its Finance Minister Michael Sarris said Tuesday.
He said capital controls aimed at preventing deposit flight
should only be in place for a matter of weeks.
Regarding the loss likely to be suffered by people with deposits
of more than 100,000 euros ($128,530) in Cyprus' two biggest banks,
he said: "The exact percentage is not yet decided but it is going
to be signicant I am afraid."
"What I have seen suggests a number in that neighborhood" of
40%, he said.
Deposits of under 100,000 euros are guaranteed from loss, but
depositors with more than that sum will have be forced to
contribute to recapitalizing the banking system, via a system that
will also see their money converted into bank shares, he said.
Mr. Sarris, who was being interviewed on BBC Radio, said he
thinks banks will reopen on Thursday, after being closed for more
than a week while the government negotiated terms of a bailout with
the European Union, European Central Bank and International
Monetary Fund.
He said capital controls aimed at preventing large-scale
withdrawals of deposits won't last for months or even years, as has
been the case in Iceland, another country that suffered a banking
crisis.
"I think we are talking a matter of weeks," Mr. Sarris said.
The controls "will probably have a two-tier system", he said,
with tighter restrictions on transactions at the two biggest banks,
the Bank of Cyprus and Cyprus Popular bank, commonly known as Laiki
Bank. The latter bank is due to be wound down.
He said the circumstances of the bailout will mean a "step
backwards" for the Cypriot economy.
Write to Alex Brittain at alex.brittain@dowjones.com