Cyprus Central Bank reviews exemptions from "haircut"

Cyprus’ Central Bank has announced that exemptions from the “haircut” in Bank of Cyprus deposits will be limited, in order to alleviate the burden for uninsured depositors.

In a decree published on Sunday, the CBC says a “haircut” of 27.5% will be imposed on a number of affected institutions and organizations which were previously spared.

Such exemptions, imposed with previous decrees, are no longer valid for insurance companies, supplementary insurance funds, charitable institutions and private educational establishments. State schools are not included in this category, but fall under the general government.

According to the Central Bank of Cyprus, overall exemptions from a “haircut” are valid for general government and local authorities’ accounts, credit institutions facilitating payments.

Following a Eurogroup decision on March 25 and an agreement concluded between the Cypriot authorities and the Troika (European Commission, ECB, IFM), a bailout deal for Nicosia foresees – among other provisions – losses on Bank of Cyprus’ uninsured depositors (over 100,000 euros).

Excluded from international markets, Cyprus applied in June 2012 for financial assistance, after its two largest banks sought state aid, following massive write downs of their Greek bond holdings amounting to €4.5 billion or 25% of the island`s GDP, as a result of the Greek sovereign debt haircut.