Bank of Cyprus chairman ‘submits resignation’ after deal

Big Cypriot depositors face a cut of ‘up to 40 per cent’

The chairman of Cyprus's biggest commerical bank, the Bank of Cyprus , has submitted his resignation following the bailout deal, a source at the bank said today.

Andreas Artemis "sent a resignation letter this morning which will be examined by the Board of Directors convening this afternoon," the bank source said.

Earlier Cyprus's finance minister Michalis Sarris said Cypriot depositors with more than €100,000 in their accounts could see up to 40 per cent of their deposits converted into bank shares.

Speaking about the proportion of large deposits that will be converted Mr Sarris told BBC radio: "It could be in that neighbourhood but I do not want to anticipate it," adding the exact figure was yet to be decided.


“But what I have seen suggests a number in that neighbourhood.” The final figure will depend on how the government decides to protect pensions.

Mr Sarris also confirmed those with less than €100,000 “will not be hit”.

Mr Sarris said all Cypriot banks will remain closed until Thursday and that capital controls will be imposed on the size and the amount of money people will be allowed to withdraw for some weeks after the banks reopen.

Mr Sarris said he was confident outflows would be more controlled as progress was made on implementing an international bailout deal for Cyprus.

The announcement to keep the banks shut last night by the Central Bank of Cyprus came hours after it said all banks except the country's two largest lenders, Laiki and Bank of Cyprus, would open today.

Banks have been closed since March 16th to avert a run on deposits as the country's politicians struggled to come up with a plan that would raise enough funds to qualify for an international bailout.

An initial plan that would seize up to 10 per cent of people's bank accounts had spooked depositors and was soundly rejected by MPs.

All except the country's two largest lenders had been due to open today after the country clinched an 11th-hour deal with euro zone and the IMF to provide Cyprus with a bailout.

Without that deal, the country's banks would have collapsed, dragging down the economy and potentially pushing it out of the euro zone.

But last night the Central Bank of Cyprus said that "for the smooth functioning of the entire banking system, the finance minister has decided, after a recommendation by the governor of the Central Bank, that all banks remain shut up to and including Wednesday".

ATMs have been functioning, but many run quickly out of cash, and a daily withdrawal limit of €100 was imposed on the two largest lenders, Bank of Cyprus and Laiki.

Under the deal reached in the early hours of yesterday morning in Brussels, Cyprus agreed to slash its oversized banking sector and inflict hefty losses on large depositors in troubled banks to secure the €10 billion bailout.

The new plan allows for the bulk of the funds to be raised by forcing losses on accounts of more than €100,000 in Laiki and Bank of Cyprus, with the remainder coming from tax increases and privatisations.

People and businesses with more than €100,000 in their accounts at Laiki face significant losses. The bank will be dissolved immediately into a bad bank containing its uninsured deposits and toxic assets, with the guaranteed deposits being transferred to the nation's biggest lender, Bank of Cyprus.

Deposits at Bank of Cyprus above €100,000 will be frozen until it becomes clear whether or to what extent they will also be forced to take losses. Those funds will eventually be converted into bank shares.

It is not yet clear how severe the losses would be to Laiki's large bank deposit holders, but the euro finance ministers noted the restructure expected to yield €4.2 billion overall. Analysts have estimated investors might lose up to 40 per cent of their money.

Speaking about the marathon negotiations in Brussels that resulted in the deal, Cyprus' president Nicos Anastasiades said "the hours were difficult, at some moments dramatic. Cyprus found itself a breath away from economic collapse".

The agreement, he said, “is painful, but under the circumstances the best we could have ensured. The danger of Cyprus' bankruptcy is definitively overcome and the tragic consequences for the economy and society are averted”.