It took a while, but everyone knew it was coming. On March 25, the European Commission, the ECB and the IMF agreed a €10bn bailout package for struggling Cyprus in a deal that caused uproar on the island and in Russia.
As part of the agreement, the second-largest bank on the island, Laiki Bank, or Popular Cyprus Bank, would be closed. Its €4.2bn of deposits exceeding €100,000 would be placed in a 'bad bank' and deposits below that threshold would be transferred to the Bank of Cyprus. The move would effectively see depositors -- many of them wealthy Russians -- pay for a chunk of the recapitalisation of Bank of Cyprus.
Billions of euro of Russian money was wiped out. It was part of an effort to help spare taxpayers from being hit by bailout costs. But the decision to target depositors had an unexpected knock-on effect. Between them, a number of mostly Russian depositors, will own a controlling stake in Bank of Cyprus through a share conversion programme under the bailout plan. Large depositors at Bank of Cyprus had 47.5pc of their money forcibly converted into shares in the institution. In December, the third tranche of bailout money was approved.