Cyprus Bailout Deal Terms

The Cyprus bailout deal has the following terms as approved by the Eurogroup:

  1. Laiki (Popular Bank) will be resolved immediately. Shareholders, bond holders and uninsured depositors will lose much if not all of their money. The exact terms will be based on terms laid out by the Central Bank of Cyprus using the new Bank Resolution Framework.
  2. Laiki will also be split into two parts: a good bank and a bad bank. The bad bank will be liquidated over time, while the good bank will be merged into the Bank of Cyprus, also using the Bank Resolution Framework
  3. BoC will then take over the 9 bn euros of ELA that Laiki has with the ECB and the ECB Governing Council will continue to provide ELA liquidity to the BoC. Uninsured deposits in BoC will remain frozen until the bank is fully recapitalized. Further capital controls may be in the offing, depending upon the circumstances after the bank re-opens.
  4. The BoC recap will be a debt for equity swap of uninsured deposits. Shareholders and bond holders will be wiped out. The swap will take up as many uninsured deposits as necessary to reach a capital ratio of 9%.
  5. All insured deposits in all Cypriot banks will be protected by the existing deposit guarantee.
  6. The 10 billion euros from the Troika will not be used to recapitalize Laiki or Bank of Cyprus.

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