TIMELINE: Bailout deal reached Cyprus: May take as much as 40 per cent

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TIMELINE: Bailout deal reached

Published on March 24, 2013

 

President Nicos Anastasiades in Brussels

UPDATED 2.58am

 

Cyprus and international lenders reached a draft deal in the early hours of this morning, which had to be approved by the Eurogroup.

Details of the deal were sketchy but involved heavy levies on both of Cyprus’ biggest banks.

Other banks appeared to have been spared. And no charges will be incurred against any Cypriot bank account with less than 100,000 euros in them, the officials said.

Reuters reported that the deal involves setting up a “good bank” and a “bad bank” and will mean that Popular Bank of Cyprus, known as Laiki, will effectively be shut down.

Deposits below 100,000 euros in Laiki will be transferred to Bank of Cyprus. Deposits above 100,000 euros, which under EU law are not insured, will be frozen and will be used to resolve debt. It remains unclear how large the writedown on those funds will be. Some reports suggested it might be as high as 40 per cent. Sources told Reuters that the proposal involved shifting deposits below 100,000 euros from the Popular Bank of Cyprus (also known as Laiki) to the Bank of Cyprus to create a “good bank”.

“It should be fairly easy for finance ministers to agree to this,” the official said. “We have been in close contact with all relevant euro zone countries during this negotiation process and there is broad agreement.”

The plan is likely to mean very heavy losses for uninsured deposits in Laiki, which has suffered since writing down the value of its holdings of Greek government bonds last year.

Around 35 billion euros is held in Cypriot accounts with more than 100,000 euros in them, but it is not clear how much of that total is held in Laiki bank.

If sufficient funds can be found in Laiki to pay off debt and restructure the Cypriot banking sector, uninsured depositors in Bank of Cyprus may not incur any losses, although that remains to be seen.

One of the officials said shareholders and bondholders in Bank of Cyprus would be part of the “bail-in”, with those investors receiving equity in the bank in exchange.

The draft proposal was agreed by Cypriot President Nicos Anastasiades in negotiation with European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso. The plan was presented to euro zone finance ministers for discussion, a short time later.

Cyprus acting President Yiannakis Omirou confirmed in Nicosia that an initial agreement had been reached in Brussels.

According to Cyprus News Agency (CNA) sources close to the government, the agreement foresees a 30 per cent “haircut” on Bank of Cyprus deposits over 100,000 euros. But crucially there would be no restructuring of the Bank of Cyprus and it would not be forced to absorb the 9 billion euro burden of emergency liquidity assistance (ELA) of LAiki. This idea, a red line for Anastiasides, had been  abandoned the sources said. However, the details remained unclear.

 

UPDATED 02:11

Acting president Yiannakis Omirou has confirmed that a deal has been struck between Cyprus and international lenders.

Government sources suggest that the deal provides for a 30 per cent haircut on deposits of over €100,000 at Bank of Cyprus while reports said Popular Bank would be resolved.

Laiki deposits under 100,000 will be transferred to a ‘good bank,’ reports said.

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President Nicos Anastasiades, European Council President Herman van Rompuy and European Commission President Jose Manuel Barroso have met over a working dinner following a failed series of meetings between the Cypriot side and Nicosia’s international lenders earlier on Sunday.

Finance Minister Michalis Sarris and Government Spokesman Christos Stylianides also attended the working dinner.

Eurozone sources say that “deliberations with the Cypriot side continue”, adding that the Finance Ministers of the remaining Euro area member states were being briefed on developments by Eurogroup President Jeroen Dijsselbloem.

 

 

UPDATED 23:15

Latest reports say Eurogroup has not started. Members were just being briefed on developments

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Eurogroup meeting rescheduled for the second time due to ongoing discussions.New time is 10pm, the Cyprus News Agency said.

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President Nicos Anastasides told international lenders that their proposal to saddle the Bank of Cyprus with some €9 billion in emergency liquidity assistance owed by the Popular Bank to the European Central Bank, effectively meant the lender’s closure in six months, the Cyprus News Agency (CNA) reported.

“I table one proposal, you don’t accept it; I table another, same thing. What else do you want me to do? Do you want to force me to resign? If that’s what you want, let me know,” CNA quoted Anastasiades as telling international lenders.

 

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Widely reported that President Nicos Anastasiades has threatened to resign should the IMF insist in saddling the Bank of Cyprus some 9 billion euros in emergency liquidity assistance owed by the Popular Bank to the European Central Bank.

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Eurozone finance ministers delayed by two hours a Sunday evening meeting intended to help Cyprus meet a Monday deadline to avert collapse of its banking system and potential exit from the euro.

A euro zone official said the Eurogroup meeting of finance ministers had been rescheduled for about 1900 GMT – 9pm Cyprus time — from 1700 GMT, because talks with Cypriot officials ahead of those discussions had overrun.

Ahead of the ministers’ meeting Cypriot President Nicos Anastasiades held talks in Brussels on Sunday with EU, European Central Bank and IMF leaders.

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President Nicos Anastasiades landed in Brussels earlier Sunday, heading straight for the European Council building to hold meetings with Presidents of the European Council and Commission Herman Van Rompuy and Jose Manuel Barroso.

At 4pm (Cyprus time), Anastasiades began a working lunch with the two top EU officials, joined by European Central Bank President Mario Draghi, IMF chief Christine Lagarde, Eurogroup head Jeroen Dijsselbloem and the EU’s commissioner for economic affairs Olli Rehn.

The Cypriot president is joined by Finance Minister Michalis Sarris, government spokesman Christos Stylianides, DISY’s number two Averof Neophytou and senior Central Bank and Finance Ministry officials George Syrichas, Andreas Trokkos and George Panteli.

According to Stylianides, Anastasiades has invited party leaders to the Presidential Palace at 5pm on Sunday, where they will be constantly updated by the president on the day’s crucial developments.

The Eurogroup will convene at 7pm in Brussels with Cyprus the only issue on the agenda.

The marathon meeting of party leaders chaired by Anastasiades on Saturday night ended at 1am with no conclusion on a sought-after agreement with the troika.

 

http://www.cyprus-mail.com/bailout/timeline-bailout-deal-reached/20130324



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