Large depositors in Bank of Cyprus will get shares in the bank worth 37.5 per cent of their deposits over €100,000, reports said last night, quoting a government decree. However, a further 22.5 per cent of the deposits will be turned into a special instrument, which may be used in its entirety or partially to recapitalise the troubled lender at a later stage. This will not bear any interest. It is understood the haircut will apply to those deposits in the bank at 10pm on March 26. The remaining 40 per cent will continue to attract interest but has been locked presumably to prevent the immediate flight of capital. A special committee will decide on how to proceed depending on the course of the economy and the bank itself. The official publication of the decree is expected today. It is understood that before the haircut, deposits will be offset against any loans a depositor may have. Current shareholders will not lose their shares but any rights they have will be suspended. Earlier yesterday, a depositor secured an injunction banning the haircut on deposits without compensation, decided by the Eurogroup early Monday as part of the island’s bailout. According to an announcement, the court banned authorities from making any decision that reduced or wiped out the plaintiff’s deposits without affording fair compensation. A second injunction banned authorities from intervening on deposits before offsetting them against the plaintiff’s obligations to the bank. The Eurogroup decision provides that current shareholders will lose their shares without compensation and ownership of BoC will go to uninsured depositors who will see around 40 per cent of their cash go towards rescuing the lender. The court decision followed another injunction issued by the Supreme Court halting the decision to wipe out all current shareholders. That decision had been secured by the Church of Cyprus, which is a major shareholder in BoC. The Cyprus News Agency (CNA) had reported that Cypriot authorities had come to an agreement with international lenders to write-down instead of write off the BoC shares. CNA also reported that an agreement was also expected over the matter of offsetting deposits against loans. According to the Eurogroup decision, the island’s second-largest lender, Laiki, will be resolved and its assets transferred to BoC, which will be recapitalised through a haircut on deposits over €100,000. Deposits under €100,000 in Laiki have been secured but a large chunk of those above could be lost

Cyprus Mail