A proposal for the creation of a compensation and social cohesion fund to compensate depositors and bondholders who lost money in the 2013 ‘haircut’, was tabled at Friday’s House plenum by Disy leader Averof Neophytou.
The aim of the fund, Neophytou’s proposal said, was to compensate bank depositors who lost money in March 2013, when the decision to close down Laiki bank – then Cyprus’ second-largest lender – and recapitalise the Bank of Cyprus – the largest lender – with uninsured deposits, which were turned into bank stock to the tune of 47.5 per cent.
At the same time, the fund aims to gradually compensate holders of bonds from either bank, the value of which was wiped out overnight, as well as the shareholders of Bank of Cyprus as on March 25, 2013.
The ultimate goal, the proposal said, is the compensation of everyone who suffered losses as a result of problems in the banking sector and the ensuing financial crisis, according to a plan to be approved by the Finance minister.
According to the proposal, the fund will receive money from the state’s revenues from the exploitation of hydrocarbons, following cabinet approval, issues of government debt, and revenues resulting from laws allowing the voluntary disclosure of income and investments.
At the same time, possible sources of funding will be government or private grants and interest or dividends on investments.
The fund, Neophytou proposed, will be managed by a nine-member committee, appointed by the cabinet for five years on recommendation by the Finance minister and approval by the House Finance committee.
Committee members, it was noted, will represent Laiki and Bank of Cyprus depositors who lost money in the haircut, and holders of bonds from either bank and Bank of Cyprus shareholders registered in the shareholders’ registry in March 2013.
Finance minister Harris Georgiades has repeatedly denied plans to compensate the victims of the haircut decisions with taxpayer money.
Last December, he unveiled a nugget of an idea for haircut depositors and bondholders to be compensated through stock in the Co-operative Central Bank, which was nationalised through two separate taxpayer-funded bailouts in 2014 and 2015, totaling almost €1.7bn.
Last month, the cabinet decided to give away 25 per cent of the CCB’s state-held stock to the co-op network’s customers, who lost no money in 2013.