DEAL: Eurogroup to go for Cyprus bailout in morning, Laiki resolution

The bank will need to raise 5.8 bln from own funds in a bail-in, while it will absorb the “good bank” operations of second-largest Popular Laiki Bank, that will eventually be wound up.

A bailout deal is "taking shape" and will be put to the euro zone finance ministers for approval early on Monday morning, Cyprus parliament Yiannakis Omirou told reporters in Nicosia.

"It seems that the whole process is nearing an agreement. A proposal is taking shape, an agreement, a programme … that will put in the next half hour, or hour, to the Eurogroup," he said.

News reports from Brussels suggested that Laiki will be shut with big losses on deposits over 100,000 euros. Bank of Cyprus will survive, but will also undergo big cuts to savings and deposit accounts of more than 100,000 euros, probably by as much as 40%.

These measures will be implemented immediately as relative laws were passed through parliament on Friday night, while it is not yet clear what will happen to a larger obligation of about 9 bln euros outstanding from liquidity provided to Laiki in recent months. The IMF insists that Bank of Cyprus carries that debt as well, while Cyprus President Nicos Anastasiades threatened to walk out of the talks and even resign if the amount was not reduced. Cyprus has also halted the takeover of the two banks’ 300-branch operations in Greece that share a portfolio of 20 bln euros.