Averof outlines plan to offer relief to those hit by 2013 bail-in

Disy leader and presidential candidate Averof Neophytou on Tuesday proposed using the proceeds from taxing bank deposits to beef up the Solidarity Fund, set up to provide relief for people affected by the 2013 bail-in.

He proposed boosting the resources of the Solidarity Fund by €60 million a year, by diverting to it the proceeds the state gained from the special tax on bank deposits.

Under a 2011 law, every bank must pay a special tax on the total deposits it maintains in Cyprus.

“Based on the provisions of the law, part of the total proceeds from levying the special tax are transferred to the Recapitalisation Fund, while the rest remains in the treasury. And based on the same law, this transfer to the Recapitalisation Fund is done until €175 million has accumulated.

“The €175 million, required by law, is expected to be accumulated by next year, that is, 2023. Therefore, Averof Neophytou proposes that the totality of proceeds from the taxation, which come to about €60 million a year, be transferred to the Solidarity Fund,” a statement said.

It added that Neophytou “once again proves in practice that he finds solutions to the problems facing the public.”

Enacted in March 2019, the Solidarity Fund aimed to provide relief to legacy Laiki depositors and bank bondholders whose investments were wiped out in the 2013 bail-in.

The Solidarity Fund was allocated €55million in start-up funds, with the government promising to finance it from state grants and proceeds from the use of state property.

The events of March 2013 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.

The total amount in compensation claims by bondholders in court cases comes to an estimated €400m.

The government has made it clear that the assistance to be given to the victims of the 2013 haircut is not ‘compensation’, as that might suggest the state was legally liable for the bail-in.

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