Cyprus haircut also hits charities, private schools

Charities, private schools and insurance firms with deposits in the troubled Bank of Cyprus will suffer a 27.5 percent haircut under the island's EU bailout, the central bank said.

They had all previously been exempt from a haircut in the bank restructuring required under the terms of the 10 billion euro bailout for Cyprus.

All insurance firm deposits will receive a hit while unregistered financial companies, charities and some educational institutions with deposits over 100,000 euros in the Bank of Cyprus will also get a 27.5 percent cut.

"The review was undertaken with the aim to limit the extent of the exemptions so as to lighten the burden on affected (large) depositors in the Bank of Cyprus," the central bank said in a statement late on Sunday.

A bail-in from depositors was a key element of a deal which Nicosia struck with its EU partners and the International Monetary Fund last month to help fund a 23 billion euro ($30 billion) rescue package.

Bank of Cyprus depositors are already facing a certain 37.5 percent loss on deposits over 100,000 euros -- to be exchanged for shares -- with another 22.5 percent locked depending on the cost of restructuring.

Large depositors could lose all of the remaining 60 percent of their balances over 100,000 euros depending on the costs of winding up and merging second-largest lender Laiki.

Savers in that bank will have to wait years to see any of their cash over 100,000 euros.

Central bank spokeswoman Aliki Stylianou told state radio Monday that the move was to ease to pressure on large Bank of Cyprus depositors but a final estimate on how much they would lose will not be ready before the end of June.

Banks have been operating under stringent capital controls since they reopened on March 28, after a near two-week lockdown prompted by fears of a run on deposits.

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