From the telegraph
14.55 And here’s what we think that proposal might look like, based on reports and rumours from journalists on the ground.
Laiki Bank – the island’s second largest lender – is wound down. Depositors’ first €100,000 are hived into the Bank of Cyprus. Everything else is put into a bad bank, and sold off, likely at a 20pc to 40pc discount. Since a wind-down of Laiki means it will not need recapitalised, this part of the plan takes care of the first €2.3bn of the €5.8bn that Cyprus must raise to qualify for its €10bn troika bailout.
So where to get the remaining €3.5bn? Since the troika royally rejected the idea of a ‘solidarity fund’, largely over objections to nationalising some pension funds, the bank levy is thought to be back on the table. According to information on the spread of deposits (see table in 12.47), a 9.46pc levy – lower than the 9.9pc proposed in the Eurogroup’s original plan – on deposits over €100,000 would do the trick.
Under such an arrangement, the biggest losers would be those with deposits over €100,000 in Laiki Bank, who could be charged a 9.46pc levy and have any deposit over €€100,000 swallowed into the ‘bad bank’ and sold off at a discount, losing as much as 40pc of its value. As Open Europe argued earlier (13.27), they could, in effect, be hit twice.