Cyprus Mail

Changes to fund will limit relief to 2013 banking crisis victims

Defunct Laiki bank

The government on Monday presented a bill amending the purpose of the law governing the operation of the Solidarity Fund, so that its objective is limited to providing relief to legacy Laiki depositors and bank bondholders whose investments were wiped out in the 2013 bail-in.

In the new bill, recapitalising banks and financing the state, both included in the existing legislation, are to be exempted from the purposes of the fund.

The government proposal appears to respond to parties’ demands on how the funds should be used.

Two parties – Diko and the Greens – had already drafted legislative proposals of their own.

Finance minister Harris Georgiades told MPs he is open to the government document being merged with the two legislative proposals, so that the whole process can be expedited by passing it as one House bill.

This would be faster than having the government table its own bill separately, and then having the parties debate it in parliament and proposing amendments before it goes to the plenum.

No matter what form it ultimately takes, Georgiades added, the Solidarity Fund would still be subject to audit by the auditor-general’s office.

However, although under the new proposal the fund would be primarily targeted at depositors who suffered a haircut and at burned bondholders, the minister said that it did not altogether rule out the government tapping a portion of the fund if needs be.

The fund would be managed by a seven-member board, featuring representatives of the finance ministry, the attorney-general’s office and the state treasury.

It would also include professional investment managers nominated by the associations of bailed-in depositors and the bondholders.

The fund’s finances are to come from state grants and proceeds from the use of state property.

The matter is to be discussed in parliament again on Thursday, in the presence of the commissioner for state aid.

Earlier, the government had made it clear that the assistance to be given to the victims of the 2013 haircut was not ‘compensation’, as that might suggest the state was legally liable for the haircut.

In December 2017, the government clarified that the fund would start paying out only when there was enough money in it, setting €100m as its first target.

In July of this year, parliament approved a supplementary budget that provided for allocating €25m in taxpayers’ money to the fund.

The government has acknowledged that only a fraction of the bail-in losses would be covered.

The March 2013 events saw the loss of €7.7bn in deposits (amounts over €100,000). In addition, anywhere from €1.2bn to €1.5bn in contingent securities were converted into equity (bank shares) of practically zero worth.


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