Cyprus’s banking system saw deposits shrink by over 6 billion euros in April as the country imposed losses on uninsured savers at Bank of Cyprus Pcl to meet terms for a financial rescue by the euro area.
Total deposits in Cyprus’s banking system dropped to 57.4 billion euros ($74 billion) from 63.7 billion euros in March, a decline of 9.9 percent, according to a statement posted on the Central Bank of Cyprus’s website. The month’s drop is the biggest since at least Dec. 2005 and follows a decline of 3.8 billion euros in March, bringing the deposit loss to 15 percent since February.
The April data reflect the “bail-in” of Bank of Cyprus depositors with savings of more than 100,000 euros, the central bank said. Of those accounts, 37.5 percent was converted into equity, the bank said. A further 22.5 percent and 30 percent of these so-called unsecured deposits are temporarily blocked and remain categorised under deposits, it said.
Cyprus agreed on March 25 to a 10 billion-euro loan from the euro area and the International Monetary Fund in return for measures including a levy on savings of more than 100,000 euros at Bank of Cyprus and the resolution of second-biggest lender Cyprus Popular Bank Pcl. Those concessions were demanded by creditors in a bid to shrink the country’s banking sector and led to Cyprus imposing the first capital controls in the euro area.
Deposits held by non-euro area residents on the island fell to 15.9 billion euros from 19 billion in March, according to today’s figures. Domestic residents’ deposits dropped to 38.3 billion euros from 41.3 billion euros, while deposits held by other euro area residents fell to 3.1 billion euros from 3.4 billion euros.
The first decision by the euro area to make savers pay for a financial rescue led to deposits dropping in Greece as well.
Greek household and business deposits in April fell to 162.3 billion euros from 164 billion euros in March, the first decline so far this year, according to a statement on the Bank of Greece’s website.
Bank of Greece Governor George Provopoulos said today authorities took quick action to shield the economy from the Cypriot crisis and the outflows at the start of April have stopped.