Cyprus: Options For Haircut Depositors

Jointly with our partners Stelios Americanos & Co LLC, a full services commercial law firm headquartered in Cyprus, we would like to update you on the situation and the available options at the moment for all the depositors in Laiki Bank and Bank of Cyprus.

1.  Cyprus Litigation and road to ECHR/ CJEU:

Following the decision of the Supreme Court of the 7th of June 2013 the only available course at the moment is an action for damages at the appropriate district courts in Cyprus. Such an action may be filed against the Government, the Central Bank of Cyprus, the implicated banks (both in Cyprus and in Greece) and the implicated European Institutions. We are also following the investigations of the special committee appointed by the Government in order to determine who is to blame for the bank crisis in Cyprus and accordingly any action may be filed even against natural persons at the decision making level of either the banks or the government, on grounds of breach of statutory duty or general duty of care towards the depositors and the bank clients. Class actions may be filed thus reducing significantly the costs for clients. Exhausting the Cyprus remedies is a condition precedent before taking  the case before the ECHR.

Bringing the cases before the Court of Justice of the European Union ("CJEU") and suing the European Commission for failure to act might be another option that we are still investigating. This action should also be accompanied by a separate action for damages. The action for failure to act would claim that the Commission (and possibly the European Central Bank) failed in its/their duty to prevent clear violations of EU law.

2.  Deposits Sale:

We have been approached by several banks and financial institutions interested in purchasing the affected bank accounts and deposits at a reduced price. In a nutshell the depositors will be selling or assigning their bank accounts in exchange of immediate cash at the agreed price and the buyer will assume all rights under such account and in extent any claims that may be attached to such an account. Keep in mind that the consideration/cash paid may be paid in any account in any country. Consideration is in cash and depends on the amount and for Bank of Cyprus could reach as much as 65% of the deposit amount.

3.  Latest relaxation of restrictive measures - Deposits in exchange of real estate in Cyprus:

According to the latest decree of the Central Bank the use of fixed term deposits is allowed for the payment of real estate acquisition in the Republic provided that:

(aa) the funds are paid directly into a loan account of the seller of the real estate within the same credit institution and

(bb) the loan of the seller of the real estate was granted prior to the entry into force of the Enforcement of Temporary Restrictive Measures on Transactions in case of Emergency First Decree, of 2013 and

(cc) the justifying documents are presented to the credit institution and

(dd) no sufficient credit balances are available in a sight/current account, with the same credit institution, to cover the payment.

The remaining amount of the fixed term deposit remains for the remaining maturity period under the same conditions.

4.  Citizenship criteria relaxed:

According to a decision of the council of Ministers of the Republic any person whose deposits in Bank of Cyprus or Laiki Bank have been affected by the "haircut" decrees may apply for citizenship if such person has suffered total loss of at least €3 million. If the loss was less than €3 million then this person may still apply for citizenship provided such person proceeds with an immediate investment or a gross investments of at for the remaining amount up to the €3 million. The process is on a fast track and may be dealt with in a couple of months.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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