Cyprus struck a last-minute bailout deal in the early hours of Monday morning, aimed at preventing the island becoming the first country forced out of the single European currency.
The deal spares all amounts in bank accounts below €100,000.
Bank of Cyprus faces huge restructuring. No bailout money will be used to the recapitalise the bank. Instead its shareholders and bondholders will be hit. It is thought depositors with over €100,000 at the bank will also be involved in the recapitalisation and could face losses of up to 40%.
Laiki Bank is 84 per cent owned by the government and it will be wound down. Its €4.2bn in deposits over €100,000 will be placed in a “bad bank”, meaning they could be wiped out entirely. Those with smaller deposits at Laiki will see their accounts transferred to the Bank of Cyprus
Banks in Cyprus, which have been shut for the past week, will remain closed until further notice.