NICOSIA -- Meeting late into the night, MPs on Friday adopted a bill restructuring the banking sector that has prompted two days of angry protests by Cyprus Popular Bank employees outside parliament.
The bill was approved by 26 votes in favour to two against. There were 25 abstentions. Ruling Disy and junior coalition partner voted in favour while opposition Akel and Edek abstained in what they described as a “position of responsibility” in these critical times.
The bill is one of a package introduced by the government as part of efforts to raise €5.8 billion in own funds to satisfy a Troika precondition before it grants €10 billion in bailout money.
The bill was sent to the House amid dramatic appeals from both the government and the Central Bank governor that it was the only way to stave off the collapse of local banks.
On Thursday the European Central Bank warned that it would cut off emergency liquidity to local banks on Monday unless a bailout package had been agreed with the Troika. Officials in Cyprus said that this would have pushed the Popular Bank into immediate, disorderly default leading to a loss of 8000 jobs and of all deposits by all customers. banks are due to re-open on Tuesday..
Under the new law, deposits of €100,000 will be guaranteed and transferred together with performing loans to a good bank. Deposits above €100,000 would be frozen, and all non performing loans transferred to a bad bank which would gradually wind up operations and sell off assets. The money raised will be distributed among the bigger depositors who are expected to lose up to 50% of their money.
But bank employees and depositors said they were being unfairly victimized adding that everyone should share in the burden of bailing out Cyprus..