CYPRUS last night clinched a last-minute deal to secure a €10bn (£8.5bn) bailout and avoid the collapse of its banking system.
The agreement came hours before a deadline, set by the European Central Bank, to come up with a deal before today.
The plan will involve winding down Laiki Bank – or the popular bank – and shifting deposits below €100,000 to the Bank of Cyprus to create a “good bank”.
Deposits over €100,000 in both banks will be frozen and used to resolve Laiki’s debts and recapitalise Bank of Cyprus in a move expected to raise around €4.2bn.
No across-the-board levy for smaller depositors is to be imposed, although the hit on large account holders in the two biggest banks is likely to be far greater than planned.
A first attempt at a bailout collapsed last week when Cypriot lawmakers rejected the controversial deposit tax.