Bank of Cyprus chairman resigns amidst squeeze on banks

Andreas Artemi, chairman Cyprus's biggest bank, Bank of Cyprus, resigned on Tuesday after the government agreed to a reorganisation of the country's leading lender as part of a €10-billion Europen Union deal to save Cyprus from bankruptcy.

Agency reports said Artemi resigned as he was opposed to the various conditions attached to the bailout deal.

Under the bailout plan, Cyprus has agreed to wind down Laiki Bank, the country's second-largest bank, by transferring some of its assets and all remaining deposits of up to €100,000 to Bank of Cyprus.

Customers of Laiki, with more than €100,000 could lose most of their money, and its bondholders and shareholders will be wiped out.

Account holders at the Bank of Cyprus will be hurt less, but up to 40 per cent of their deposits above €100,000 could be converted into shares in the bank.

However, Bank of Cyprus would have to absorb all of Laiki's debts.

Local news web site Stockwatch said an administrator has been appointed for Bank of Cyprus and the banks branches in Greece were sold without informing the group's management.

Cyprus state broadcaster RIK said Artemis is also opposed to the planned levy on deposits of more than €100,000, as part of the bailout deal.

Cyprus's finance minister Michalis Sarris had said Cypriot depositors with more than €100,000 in their accounts could see up to 40 per cent of their deposits converted into bank shares.

The Central Bank of Cyprus on Wednesday announced the closure of all banks except the country's top two lenders - Laiki and Bank of Cyprus.

Banks had also imposed controls on the size and the amount of money people can withdraw for some weeks after the banks reopen.

Two main Cyprus banks also slashed ATM withdrawal limits to avert a run on banks.

Financial authorities in Cyprus expect that the outflows could be controlled with progress on implementing an international bailout deal.

Banks across Cyprus have, in fact, been closed since 16 March to avert a run on deposits as the government struggled to come up with a viable funding plan for an international bailout.

Meanwhile, Russia, which initially opposed the bailout levy on Cyprus banks, however, agreed to renegotiate its loans to the country.

Overseas lenders, excluding those in Russia, had $59.2 billion of outstanding loans to Cyprus at the end of September, according to Bank for International Settlements (BIS) data.

The BIS data show lenders from Greece and Germany have the biggest exposures to Cyprus of the reporting countries.