Government sources stressed that deposits held in the London branches of Bank of Cyprus UK and Laiki Bank would not be subject to the new levy.
Treasury sources said that “deposits in UK subsidiaries and branches [of Cypriot banks] aren’t affected” by the new measure, part of a drastic series of measures imposed by the eurozone against Cyprus in return for its aid.
The sources were backed up by a statement from Bank of Cyprus UK which stressed it is “a separately capitalised UK incorporated bank, is subject to UK financial regulation, and eligible depositors are protected by the UK’s Financial Services Compensation Scheme.” Laiki Bank placed a similar statement on its website.
However the fate of savings belonging to British-born Cypriots and their descendants who deposited their money directly into Cypriot banks seemed less clear.
In a departure from previous Euro bail-outs – the small Mediterranean country is the fifth country to have turned to the eurozone for financial aid – the country’s savers are being asked to make sacrifices in a move which critics say has dangerous precedents for future bail-outs.
The terms of the deal mean that Cyprus’s savers will however sacrifice up to 10pc of their deposits in a move which will raise €5.8bn.
The deposit tax, which will raise €5.8bn, is likely to prove unpopular with the country’s 1m citizens – and the Russian non-residents who reportedly account for half the deposits in Cyprus’s banks – and will be enacted almost immediately.
Following a bank holiday in the country on Monday, March 18, the levy on bank deposits will come into force on Tuesday, March 19. The emergency levy will be set at 9.9pc for bank deposits over €100,000, and 6.75pc for deposits below that. Depositors will receive bank equity as compensation.
The Cypriot government took steps to prevent electronic money transfers over the weekend, in order to stop depositors attempting to avoid the curbs.
Sharon Bowles MEP, who chairs the European Parliament’s economic and monetary affairs committee, said she was appalled by the Cyprus bailout, which includes ‘bailing-in’ some guaranteed deposits by swapping them for shares.
“This grabbing of ordinary depositors’ money is billed as a tax, so as to try and circumvent the EU’s deposit guarantee laws. It robs smaller investors of the protection they were promised. If this were a bank, they would be in court for mis-selling,” she said.
Daily Telegraph