The move guarantees the cash of about 5 per cent or 750 of the 15,000 British savers in Laiki who held more than €100,000 (£84,500) in Cyprus’s second biggest bank, which is being wound up under the terms of an international rescue.
The deal sees British savings accounts and current accounts that are in credit transferred to the Bank of Cyprus’s UK subsidiary, which comes under the aegis of the Bank of England’s new Prudential Regulation Authority. Bank of England deputy Governor and PRA chief executive Andrew Bailey spent last week thrashing out a deal to protect savers.
Laiki Bank UK was a branch of the Cypriot bank rather than a subsidiary, meaning Britain was not obliged to protect its depositors. But the deposits have been transferred in full and will now come under the UK Financial Services Compensation Scheme, which protects the first £85,000 of British savers. Laiki depositors can continue to use the bank’s UK branches while the transfer takes place.
“All customers who had an account with Laiki Bank UK will be able to access funds as normal and do not need to do anything,” the PRA said. A spokesman for the Bank of Cyprus UK said: “This deal was a joint effort from both banks both here in the UK and in Cyprus, the regulator in Cyprus and the PRA to ensure that the 15,000 Laiki UK savers were transferred to Bank of Cyprus UK.”
Under the terms of the international bailout agreement for Cyprus, depositors with savings of more than €100,000 in Laiki and the Bank of Cyprus in Cyprus itself will lose up to 40 per cent of their savings to help pay for the country’s bailout. The beleaguered nation imposed capital controls to prevent a bank run.
The UK deal does not cover those customers with current accounts in overdraft. These accounts are now frozen at Laiki Bank UK and will not be transferred. Customers in credit will be transferred, but their overdraft facilities have been cancelled.
Laiki customers with mortgages and other loans have been switched to Bank of Cyprus and must deal with the Cypriot parent bank rather than the UK subsidiary.