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Published: Monday April 8, 2013 MYT 12:00:00 AM
Updated: Friday April 26, 2013 MYT 1:11:51 AM

Cyprus bailout shows banks can go bust

BERLIN: The Cyprus bailout shows banks can be wound down despite difficulties, European Central Bank policymaker Jens Weidmann said in an interview, adding the situation on the island had stabilised.

Weidmann, chief of Germany’s Bundesbank, told Deutschlandfunk radio he wouldn’t rule out that Cyprus might need yet more liquidity, but stressed it was longer term structural reforms that would solve Nicosia’s problems and not more cash.

To secure a 10 billion euro European Union/International Monetary Fund bailout last month, Cyprus forced heavy losses on wealthier depositors.

Initially it had also pledged to introduce a levy on deposits of less than 100,000 euros before reneging in the face of protests.

The agreement also includes the winding down of the island’s second-largest bank Cyprus Popular Bank.

Cyprus’ bailout was not a template, Weidmann said, due to the large size of its financial sector, although it was crucial that those who bore responsibility for getting banks into trouble bore some liability.

“It is important to draw the lesson from Cyprus that banks can be wound up, despite all the difficulties along the way in working out the programme. This is a positive signal, and should help limit uncertainty.

“We can’t always rescue banks which have got into difficulties with taxpayers’ money. It is about winding down banks in such a way that it doesn’t endanger the financial system.” – Reuters

Tags / Keywords: News, Business, Business, Cyprus, banking crisis, EU

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