A Limassol court this week found in favour of a group of depositors with now-defunct Laiki (Popular) Bank who saw their savings wiped out in the March 2013 ‘haircut’, awarding them €5.7 million in compensation.

It was only the second time plaintiffs won a case relating to the 2013 bank bail-in, coming just a couple of weeks after the first-ever such ruling in a separate case.

The five plaintiffs – Russian and Belarussian nationals – were jointly suing Laiki, the Central Bank of Cyprus (CBC) and the Republic of Cyprus.

Subsequently Laiki was dropped from the list of defendants in the lawsuit, due to the fact the bank is in liquidation and thus unable to compensate the plaintiffs.

The decision therefore concerns the CBC – as the banking regulator – and the Republic of Cyprus.

Essentially the ruling gives back to the plaintiffs all the savings they lost in the bail-in – any and all uninsured deposits over €100,000.

The Central Bank and the Republic (the state) were held responsible for negligence, dereliction of duty as well as misrepresentations that led to the collapse of Laiki Bank.

The plaintiffs successfully argued that the Central Bank had failed to warn Cypriot lenders of the consequences of the write-down of Greek government bonds. Additionally, while Laiki was facing a severe liquidity crunch, the Central Bank exempted the government bonds when calculating the lender’s capital adequacy ratio – as a result of which Laiki continued to be regarded as solvent.

Despite Laiki not meeting the required capital adequacy ratios, the Central Bank continued to provide it with Emergency Liquidity Assistance up until May 2012.

Also, both the Central Bank and the state are held accountable for having failed to diagnose in a timely fashion the looming financial meltdown, which they should have foreseen as far back as 2009.

In their defence, the defendants denied the charge of negligence, and said the decision on the resolution of Laiki and Bank of Cyprus – as part of a rescue deal with international lenders – was taken in the public interest.

On March 16, 2013 the Cypriot government agreed with the ‘troika’ of international lenders a €10 billion rescue package. Under the loan deal, no amount was to be used to re-capitalise Cypriot banks, instead introducing the method of the bail-in.

On March 19 the Cypriot parliament rejected a proposal that would have imposed a one-time ‘tax’ on all deposits in all banks. Three days later, parliament passed a series of laws that greenlit the resolution of Laiki and Bank of Cyprus.

It was not immediately known whether the attorney-general’s office – representing the Republic – would appeal this latest court decision.

Meantime also on Thursday, a similar lawsuit filed with Larnaca district court went the other way, with the court ruling against the plaintiffs.

The Larnaca court said the defendants – again the Central Bank and the state – were not at fault for the situation leading up to the ‘haircut’.

The court ordered the plaintiff to pay the Republic’s legal fees.