The main elements in the resolution of the Cyprus crisis have clarified this weekend. Although there are many specifics still be be settled, it appears that large depositors in the Bank of Cyprus are likely to lose 40-60 per cent of their original worth, while those in the Laiki Bank will probably lose almost all of their money.
Most observers agree that this second attempt at a resolution is highly preferable to the first, largely because it avoids imposing losses on small scale deposit holders (under E100,000, which are intended to be “insured” under the eurozone’s future bank insurance regimes). However, the brutal losses imposed on large depositors this weekend will come as a shock. And all those with money in Cyprus now face severely impaired liquidity because of draconian capital controls. Read more