Deposit insurance applies to all banks in Cyprus

— EUR 20.000 maximum covered

All banks in Cyprus, including local and the international units, are covered by the deposit insurance scheme, under which, in the event of a default, deposits up to EUR 20.000 will be covered.

Central Bank Governor Christodoulos Christodoulou told the Financial Mirror that since the beginning of 2006, all the 26 International Banking Units, formerly know as “offshore” banks, plus the one Representative Office based in Cyprus are considered local banks, which means they may operate and deal with Cyprus residents.

“They are under our strict regulation and supervision,” said Christodoulou, who nevertheless clarified that the lenders of last resort remain the main head offices of the international banks from where they have secured their original permit and not Cyprus.

According to reliable information, only three units are domiciled in Cyprus.

Central Bank officials further told the Financial Mirror that while the deposit insurance scheme also covers the IBUs, but they pointed out that deposits placed in US dollars are not covered.

Since the bulk of the customer deposits with the IBUs is in dollars, in effect there is no protection, albeit the small EUR 20.000 which under normal circumstances would apply in the case of a default.

But the Central Bank is not worried, arguing that all of the IBU’s abide by its minimum capital adequacy ratios as well as liquidity and reserve requirements, and also because as a whole, they hold a very small share of deposits compared to the local banks.

Until end of March 2006, the Central Bank figures show that total customer deposits with local banks amounted to CYP 16.4 bln, while total customer deposits with the 26 IBUs plus the one Rep. office until February 2006 amounted to USD 4.7 bln or CYP 2.1 bln.