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Cyprus large depositors face 60% in losses

FXstreet.com (Barcelona) - Large deposits above 100,000 euros sitting on Bank of Cyprus account face losses of as much as 60% on Bank, an announcement made over the weekend by the bank suggests, which occurs within the context of a semi-legal robbery to prevent the country from going bust.

According to authorities, customers will have 37.5% of their deposits above 100,000 euros converted into shares with access to the bank's future possible dividends. An additional 22.5% is to be provisionally withheld until a recapitalization process is complete, a tough decision that follows the agreement between Cypriot officials with the Troika.

According to Bloomberg, citing Marios Mavrides, a lawmaker for the ruling Disy party, in a phone interview from Nicosia: "The deposit-loss plan will make things worse as small and medium-sized companies will run out of liquidity,” with the move “not helping to gain back people’s trust, deposits should be free in order to gain that trust,” he said.

As Sebastien Galy, currency strategist at Societe Generale, notes: "Over the week end, Cyprus decided to effectively freeze all deposits above 100k in the two banks and in the offshore one to swap 60 percent for stocks. Excluded are government and financial institutions. Trusts are completly frozen until ID is shown (presumably a large chunk of the offshore money)."

"It looks like a very raw deal for what are presumed russian clients, suggesting we haven't heard the last of it. More importantly, it will increase the perception that gvt debt is ultra prime in Europe and this at the expense of all" he adds.

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