Cyprus details heavy losses for major bank customers

Sat Mar 30, 2013 11:45am EDT
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By Karolina Tagaris

NICOSIA (Reuters) - Major depositors in Cyprus's biggest bank will lose around 60 percent of savings over 100,000 euros, its central bank confirmed on Saturday, sharpening the terms of a bailout that has shaken European banks but saved the island from bankruptcy.

Initial signs that big depositors in Bank of Cyprus would take a hit of 30 to 40 percent - the first time the euro zone has made bank customers contribute to a bailout - had already unnerved investors in European lenders this week.

But the official decree published on Saturday confirmed a Reuters report a day earlier that the bank would give depositors shares worth just 37.5 percent of savings over 100,000 euros. The rest of such holdings might never be paid back.

The toughening of the terms sends a clear signal that the bailout means the end of Cyprus as a hub for offshore finance and could accelerate economic decline on the island and bring steeper job losses.

Banks reopened to relative calm on Thursday after the imposition of the first capital controls the euro has seen since it was launched a decade ago.

The streets of Nicosia were filled with crowds relaxing in its cafes and bars on Saturday, but popular anger was not hard to find.

"Europe shouldn't have allowed this disaster to happen here. Cyprus was paradise and they've turned it into hell," said Tryfonas Neokleous, owner of a clothes shop on a cobbled street in the center of the city.

He said he didn't except business to pick up even now that the banks were open again after an almost two-week shutdown.   Continued...

Men watch a soccer match at a restaurant in Nicosia March 30, 2013. REUTERS/Bogdan Cristel