Cyprus Deposit Haircut is ‘Legalized Theft’ Says Russian Businessman

"This is legalized theft" - Russian companies and individuals reportedly hold over $30 billion – about a third of all deposits – in Cypriot banks.

 (RIA Novosti) – The Cypriot authorities’ plans to force losses on local account-holders to unlock a much-needed bailout aid from international lenders breach international accords and will be challenged in court, the head of the Association of Russian Businessmen in Cyprus said on Monday.

The finance ministers of the 17-nation euro area agreed early on Monday on a 10-billion euro ($13-billion) deal for Cyprus to rescue the island nation and its outsized banking sector from a financial collapse. The new deal will force the holders of accounts of over 100,000 euros to take losses that may amount to 30-40 percent of their deposits.

Russian companies and individuals reportedly hold over $30 billion – about a third of all deposits – in Cypriot banks.

“Let me put it this way: This is legalized theft,” Yury Pyanykh, president of the Association of Russian Businessmen in Cyprus, told RIA Novosti.

“This violates a number of fundamental international treaties. And if this action is taken, I can imagine how many lawsuits will be initiated over this case and how many of them will be won,” he said.

A final decision on the size and the nature of forced deposit write-downs has not yet been made, the businessman said, adding that it was unclear whether the deposit haircut would affect only Cypriot banks, or branches of foreign banks on the island as well.

Not all of the details of the new deal have been made public yet. Media reports have said the new plan will spare all deposits of less than 100,000 euros, but force bigger losses on account holders with more than 100,000 euros in the country’s two biggest lenders, the Bank of Cyprus and Popular Bank of Cyprus.

Under the new deal, Popular Bank will be broken up and its deposits of less than 100,000 euros will be moved into the Bank of Cyprus, which will be restructured. Popular Bank’s deposits of over 100,000 euros will be frozen and used to resolve its debts.