The Cabinet decided on Wednesday that up to €299 million will be earmarked in total in the 2013 – 2014 budgets for compensation of provident fund and pensions deposits in former Cyprus Popular Bank (Laiki), Deputy Government Spokesman Victoras Papadopoulos has said.

In statements he made to the press after the Cabinet meeting, Papadopoulos said that the plan’s adoption was a prerequisite for the disbursement of the second tranche of the international rescue package.

“The Cyprus government will commit an amount of up to 299 million euro from the budgets of 2013 and 2014 for this compensation, of which a maximum of 154 million euro can be made available before the second Troika review”, he added.

He continued to say that the plan should ensure a similar treatment for Laiki provident funds deposits with Bank of Cyprus provident funds deposits and that the cash flow and actuarial position of each fund will be taken into consideration when deciding the timing of the compensation. He also said that the impact on the fiscal balance must be minimized whilst the temporary nature of the measure should also be ensured.

Provident funds deposited in Cyprus banks were affected following an agreement between Cyprus and its international lenders (the European Commission, the European Central Bank and the IMF) in late March on a €10 billion bailout programme.

The agreement provided for a haircut on uninsured deposits of over 100,000 in the island`s two largest banks. Laiki, Cyprus’ second largest lender, is being wound down with full contribution of equity shareholders, bondholders and uninsured depositors.  Its good part has been absorbed by Bank of Cyprus, the island’s largest lender.

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