Cyprus Mail

Efforts to keep provident fund haircuts as low as possible

Finance minister Harris Georgiades

THE government will try to limit the losses of provident fund members to around 25 per cent of the amount they would have received before an EU decision to resolve one bank and raid deposits in the island’s biggest, the finance minister said yesterday.

Workers’ provident funds have been affected by a Eurogroup decision to resolve Laiki, the island’s second-biggest, and recapitalise Bank of Cyprus by raiding customers’ deposits.

The decision was part of a €10 billion bailout agreement with international lenders.

In a letter to the House President, Finance Minister Harris Georgiades said that an amount will be given from the bailout to compensate provident funds with deposits in Laiki, which is being wound down.

The aim is to keep their losses on the same level with those deposited in the Bank of Cyprus, which will undergo a so-called haircut whose rate has not been finalised yet.

Under the conditions of the bailout, uninsured deposits of over €100,000 could be cut by 60 per cent to finance the lender’s recapitalisation.

Depositors will receive equity in exchange for their loss.

The state will also provide additional compensation to those eligible, paid when they retired or in the event of death or total disability, the minister said.

“The objective of the above actions is to limit the loss for affected members to 25 per cent of the amount each member would have received,” Georgiades said.

Participation in the programme would be mandatory for provident funds in Laiki while those in the BoC would have a choice.
Either participate in the scheme by handing over BoC shares of equal value or keep their shares and stay out.

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Source: Cyprus News Agency