Cyprus on Thursday said it would set up a fund to support bank depositors who lost funds in a 2013 bail-in, forced on the island by lenders in return for a 10 billion euro (£8.8 billion) bailout.
Authorities would initially pledge 25 million euros to the fund, which would be replenished over years from state coffers, Finance Minister Harris Georgiades said.
“We consider this a viable prospect, even though it does not offer an immediate remedy,” he told reporters.
Scores of people saw savings exceeding 100,000 euros wiped out in the Cyprus Popular Bank, which was wound down as a condition for financial aid extended to Cyprus by the European Union and the International Monetary Fund.
Persons holding deposits in a second bank, Bank of Cyprus, had funds seized and converted into equity to recapitalise the lender.
Both banks took a hit when sizeable quantities of Greek sovereign debt were written down in an EU-sanctioned haircut of privately-held debt in 2012.
The move was designed at the time to make Greece’s debt mountain more manageable, but had a disproportionate spillover effect in Cyprus.
The fund would operate on guidelines which would be established by parliament and the island’s cabinet, Georgiades said. Authorities would also consider including state assets in the fund, he said.
Cyprus emerged from a three year adjustment programme in 2016. Presidential elections are scheduled for January 2018.
Source: Reuters (Writing By Michele Kambas; editing by Mark Heinrich)