Attorney General challenges first ‘haircut’ victory

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The Legal Service is appealing a Limassol District Court awarding over €780,000 in compensation to a Russian client of the former Laiki Bank for the 2013 deposit haircut.

Acting on behalf of the Republic of Cyprus and the Central Bank of Cyprus (CBC), the Attorney General’s office is challenging the decision, a legal first since the 2013 bail-in.

Following the Limassol court’s ruling, a Russian depositor hit by the 2013 Laiki Bank ‘haircut’ was awarded compensation exceeding €780,000 from the government.

The court’s decision on Wednesday attributed the deposit reduction to negligent acts by the Republic of Cyprus and the Central Bank, with the attorney general’s office promptly appealing.

Similar lawsuits filed by depositors post the crash had all faltered.

“The court decision is the first to side with a plaintiff in a case of such a nature and deviates from all previous decisions issued to date, where similar claims were rejected,” said the Attorney General’s office in a statement Thursday.

In the legal first, the judge presiding over the case criticised the government and the CBC for mishandling the 2009 financial crisis, emphasising their failure to plan, develop, and protect the economy.

The court also censured former President Nicos Anastasiades for misleading statements discouraging the plaintiff from withdrawing funds before the haircut, causing real damage.

The District Court of Limassol ruled “…the Cyprus Republic assumed responsibility for the positions of its representatives, particularly those of the President, who stated that he would not allow ‘slashing’ of deposits.

“This justifiably stopped the plaintiff from withdrawing his deposits, resulting in actual damage due to their loss.

“The Cyprus Republic assumed the responsibility for the protection of depositors even earlier, through the payment of €1.8 billion for purchasing the Pre-emptive Rights issued by Laiki Bank in June 2012”.


The government was deemed negligent for not seeking timely European assistance and opting for a loan without adequate planning.

Regarding the CBC, the court condemned its failure to control and protect depositors’ interests, allowing unchecked expansion in the banking sector.

It highlighted the CBC’s lack of independent action, trailing the government’s inaction and refusal to address financial issues.

The court’s ruling reflects a critical assessment of the government and CBC’s handling of the financial crisis, resulting in a significant compensation award to the affected depositor.

In his comments to the CNA, Adonis Papaconstantinou, the president of the Depositors Association of the former Laiki Bank (SYKALA), said the decision is of grave importance as this was the first time that “…the judge delved into the preceding actions and shortcomings of both the government and the CBC, identifying them as culprits in the 2013 crisis”.

Papaconstantinou cited the example of the haircut on Greek government bonds (Psi), causing Cypriot credit institutions to incur losses amounting to €4.5 billion.

“It’s inadequate to pinpoint 2013 as the starting point, as there were antecedent factors contributing to the situation, a perspective the judge thoroughly examined based on the presented evidence”.

He also criticised the CBC for its lack of necessary supervisory control, highlighting the banks’ responsibility in purchasing Greek bonds when European banks were offloading them.

Asked if the decision set a precedent, Papaconstantinou acknowledged the possibility.

However, he said other cases with unfavourable outcomes underscore the complexity of legal proceedings in this context.

“There are too many cases, too many lawyers involved. It is difficult to pinpoint the exact number of pending cases”.

A haircut was imposed on uninsured deposits over €100,000 as part of the €10 bln bailout for Cyprus by the Euro area finance ministers (Eurogroup) in March 2013.

As part of the decision, a haircut on uninsured depositors was imposed on the Bank of Cyprus, while Laiki Bank would be liquidated.

According to IMF estimates, the haircut of uninsured deposits amounted to almost €8 billion, of which €3.7 billion was in Laiki.

From December, a government online platform for those affected by the 2013 decisions (deprived depositors, security holders and shareholders) will be operational to apply for support from the Solidarity Fund established, with the first disbursements expected in 2024.