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President of Cyprus commits to compensating depositors who suffered haircuts

September 2013 - Finance. Legal Developments by Stelios Americanos & Co.

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Cyprus will compensate Russian bank depositors who suffered haircuts to their deposits, as a result of the recent measures taken in order to comply with the terms of the Island's €10 billion bailout, said  President Anastasiades.

The President made this commitment during an interview to Itar-Tass, Russian news. He stated that when the Island's economy recovers, a dedicated fund would be launched in order to raise equity, inter alia, from revenues derived from future sale of natural gas proceeds. A significant number of Russians clients of Laiki Bank, lost part of their deposits and Cyprus will do everything possible in order to recover the negative effects of these measures, the President added.

In terms of the  €10 billion bailout of Cyprus, negotiated with the "EU troika and immediately thereafter implemented in March of this year, Laiki Bank, the second largest bank in Cyprus was in fact closed and uninsured deposits were seized. The largest bank on the Island, Bank of Cyprus was consequently recapitaliszed. Laiki accounts were then assumed by the BoC and depositors who suffered such seizure of deposits were given BoC equity in return.

A new BoC Board was elected earlier this month and includes 16 non Cypriot persons, the majority of whom are Russians who represent individuals who suffered significant haircuts to their deposits in the forced conversion to equity of 47.5 percent of deposits exceeding €100,000.