Cypriot Banking Crisis
About Cypriot Banking Crisis
Cyprus developed an outsized banking sector, with bank assets reaching 7 times GDP. Cypriot banks attracted foreign deposits, particularly from Russia and Greece. The banks invested heavily in Greek government bonds. When Greek debt was restructured in 2012, Cypriot banks suffered massive losses. The government could not afford to bail out the banks. In March 2013, Cyprus implemented a bail in, forcing large depositors to accept losses. The Bank of Cyprus converted 47.5 percent of uninsured deposits into equity. Laiki Bank was wound down. The crisis devastated the Cypriot economy, which contracted by 5 percent. Cyprus became the first eurozone country to impose capital controls, limiting withdrawals and transfers.
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