Cyprus brings about worldwide unprecedented bank recapitalization (2)

In a closely related move, Central Bank Governor Panicos Demetriades issued a decree transferring the operations of Cyprus Popular Bank, known also as Laiki, to Bank of Cyprus.

Deposits below 100,000 euros and all other assets in Laiki, but also all debts of the bank above 100,000 euros, including a 9.2-billion-debt to the Central Bank resulting from emergency liquidity assistance it received mostly over the last 12 months, will be transfered into the Bank of Cyprus.

All deposits above 100,000 euros in Laiki will be blocked in a bad section of the bank until its final liquidation expected to come about after seven years.

Demetriades has publicly conceded that on orders of the previous left-wing government, the Central Bank kept pumping cash into Laiki for over a year although it knew that it was bankrupt, because presidential elections were coming up.

New Cyprus president Nicos Anastasiades, who was elected in the February presidential vote, in a public speech on Friday hit out at both the Central bank of Cyprus and the European Central Bank, which provided the cash, for keeping alive a crippled bank.

"How serious can be considered those authorities which permitted the financing of a bankrupt bank to the highest possible amount?" said Anastasiades after pointing out that Laiki got almost the same amount Cyprus will get in bailout loans.