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On 16 March 2013, the Eurogroup, European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) agreed a €10 billion deal with Cyprus,[30] making it the fifth country—after Greece, Ireland, Portugal and Spain—to receive money from the EU-IMF. As part of the deal, a one-off bank deposit levy of 6.7% for deposits up to €100,000 and 9.9% f or higher deposits, was announced on all domestic bank accounts. Savers were due to be compensated with shares in their banks.[31] Measures were put in place to prevent withdrawal or transfer of moneys representing the prescribed levy.[32]
The deal required the approval of the Cypriot parliament, which was due to debate it on 18 March. According to President Nicos Anastasiades, failure to ratify the measures would lead to a "disorderly bankruptcy" of the country.[31] The Russian government "blasted Cyprus's bank levy, piling more pressure on the country's capital, Nicosia" ahead of the parliament's vote on the bailout. Russia had not decided at the time whether to extend its existing loan to Cyprus.[33] With the background of large demonstrations outside the House of Representatives in Nicosia by Cypriot people protesting the bank deposit levy,[34] the deal was rejected by the Cypriot parliament on 19 March 2013 with 36 votes against, 19 abstentions and one not present for the vote.[35]
On 22 March, the Cyprus legislature approved a plan to restructure the Cyprus Popular Bank, its 2nd largest bank also known as Laiki Bank, creating in the process a so-called "bad bank."[36] On 25 March, Cyprus President Anastasiades, Eurozone finance ministers, and IMF officials announced a new plan to preserve all insured deposits of 100,000 Euros or less without a levy, but shut down Laiki Bank, levying all uninsured deposits there, and levying 40% of uninsured deposits in Bank of Cyprus, held mostly by wealthy Russians and Russian Multinational corporations who use Cyprus as an offshore bank and safe tax haven. The revised agreement, expected to raise 4.2 billion Euros in return for a €10 billion bailout, does not require any further approval of the Cypriot parliament, as the legal framework for the implied solutions for Laiki Bank and Bank of Cyprus has already been accounted for in the bill passed by the parliament last week.[6][7]
When the final agreement was settled on 25 March, the idea of imposing any sort of deposit levy was dropped, as it was instead now possible to reach a mutual agreement with the Cypriot authorities accepting a direct closure of the most troubled Laiki Bank (with remaining good assets and deposits below €100,000 being saved and transferred to Bank of Cyprus (BoC), while shareholder capital would be written off, and the uninsured deposits above €100,000 - along with other creditor claims - would be lost to the degree being decided by how much the receivership subsequently can recover from liquidation of the remaining bad assets), while as an extra safety measure, uninsured deposits above €100,000 in BoC will also remain frozen until a recapitalisation has been implemented (with a possible imposed haircut if this is later deemed needed to reach the requirement for a 9% tier 1 capital ratio). The targeted closure of Laiki and recapitalisation plan for BoC helped significantly to reduce the needed loan amount for the overall bailout package, so that €10bn was still sufficient without need for imposing a general levy on bank deposits. The final conditions for activation of the bailout package were outlined by the Troika's MoU agreement, which was endorsed in full by the Cypriot House of Representatives on 30 April 2013, and included