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Agreement for Support of Cyprus Economy by the EU

26 Mar 2013

An agreement has been reached between the Cyprus Government and the Troika which has put an end to the uncertainty around the Cyprus Economy. The main elements of the agreement which provides for an assistance of €10bn to Cyprus and intends to restore the viability of the financial sector and provide for sustainable growth and healthy public finances during the following years are:

  • All deposits per depositor of up to €100k will be secured.
  • Laiki will be split into "good" and "bad" banks, with the “good” bank eventually being merged into Bank of Cyprus. Unsecured deposits in Bank of Cyprus (over €100k) will be used to recapitalise the Bank. The depositors affected will become shareholders in the bank with the percentage to be levied on the large deposits that will be converted to capital will be known in the near future. The European Central Bank will provide any liquidity necessary to the whole banking system.
  • The balances maintained by both physical and legal persons with all the other banks in Cyprus will not be affected in any way.
  • The companies incorporated in Cyprus will continue to enjoy all the benefits as before (tax, legal, regulatory, service). As a result Cyprus maintains its preferential status for holding companies, IP companies as well as financing companies. Changes in the rates of corporation tax and tax on interest on deposits will not largely affect companies/ groups that structure their word wide activities through Cyprus.
  • Controls will be imposed by the Central Bank of Cyprus on the movement of funds in order to stabilise the banking system of the country. These controls are expected to be temporary and short-term without a serious impact on daily business transactions. Further, it is expected that they are going to be lifted once the trust and confidence return to the investors.