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22 Mar 2013
Forex Flash: Cyprus situation an interesting turn – Deutsche Bank
FXstreet.com (Barcelona) - Recent reports suggest that the Cypriot government is tabling legislation, which will restructure Popular Bank and impose transaction restrictions across the country's banking system. The core part of the government's bank resolution proposal is a splitting of Popular Bank into a good and bad bank.
Deposits under €100K will be transferred to the good bank and larger deposits will be folded into the latter – other banks would be recapitalized. According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “The draft legislation also seeks to restrict noncash transactions, curtail check cashing, limit withdrawals and convert checking accounts into fixed-term deposits when banks eventually reopen.”
According to the deputy leader of the ruling Democratic Rally party, the plan would reduce the banking sector's funding requirements to €3.5B (from €5.8B) and 361,000 depositors out of 379,000 will "get 100% of their deposits guaranteed". It's unclear how the remaining funding gap will be met - media reports suggest some combination of using state assets as collateral and the use of pension fund assets. Finance Minister Sarris confirmed early this morning that Cyprus did not receive financial assistance requested from Russia, but the terms of Russia's existing loan may be revised.
Deposits under €100K will be transferred to the good bank and larger deposits will be folded into the latter – other banks would be recapitalized. According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “The draft legislation also seeks to restrict noncash transactions, curtail check cashing, limit withdrawals and convert checking accounts into fixed-term deposits when banks eventually reopen.”
According to the deputy leader of the ruling Democratic Rally party, the plan would reduce the banking sector's funding requirements to €3.5B (from €5.8B) and 361,000 depositors out of 379,000 will "get 100% of their deposits guaranteed". It's unclear how the remaining funding gap will be met - media reports suggest some combination of using state assets as collateral and the use of pension fund assets. Finance Minister Sarris confirmed early this morning that Cyprus did not receive financial assistance requested from Russia, but the terms of Russia's existing loan may be revised.