New UK Financial Regulator Flexes Muscle over Cyprus Bank Laiki
The UK’s new financial regulator, the
Prudential Regulation Authority (PRA),
which was launched on 1 April, has given an early demonstration of its powers by overseeing a deal to safeguard the deposits of UK customers with Cyprus’s failed bank Laiki. Around 15,000 account holders will escape any levy imposed on savings by the Cypriot authorities.
The PRA – set up as a unit of the Bank of England (BoE) which inherited powers from the now disbanded Financial Services Authority (FSA) to regulate banks’ safety – said depositors with Laiki’s UK operation would have their money automatically transferred to Bank of Cyprus UK.
Bank of Cyprus, the island’s biggest bank, operates in the UK via a subsidiary, with deposits covered by Britain’s Financial Services Compensation Scheme (FSCS), which guarantees up to £85,000 per depositor. Bank of Cyprus UK confirmed that the customers it has acquired “will not be subject to the imposition of any ‘levy’, ‘haircut’ or withdrawal restrictions applicable to deposits with banks in Cyprus”.
Under terms for the
bailout of Cyprus
agreed by the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF), it was agreed that Laiki would close, with its healthy operations being folded into Bank of Cyprus. However, holders of Cyprus-based deposits with Laiki look set to lose much or all of their money above the €100,000 deposit guarantee level that operates across the EU.
Holders of Cyprus-based deposits with Bank of Cyprus could lose up to 60% of their money above €100,000 following a new provision announced since the deal to build an extra capital buffer. Deposit holders with Bank of Cyprus UK are safeguarded.