Cyprus votes against bank tax plan

New draft bill recommends no charge on deposits up to €100,000

The Associated Press

Cyprus trims bank grab2:50Cypriot government officials have voted against a plan that would have seen all bank accounts in the country take as much as a 10 per cent haircut, leaving the path to a possible bailout in doubt.
In a closely watched vote Tuesday, parliamentarians in Cyprus voted down a plan that would have imposed a one-time levy of 6.75 per cent on all bank accounts with less than €100,000 in assets, and 9.9 per cent above that level.
In total, 36 voted against the plan, with 19 abstentions.
The scheme was intended to raise €5.8 billion ($7.5 billion) toward a financial bailout by seizing money from bank accounts.
The plan, which is part of a larger bailout package being negotiated with other European countries, has been met with fury in Cyprus and has sent jitters across financial markets.
Banks in Cyprus will stay shut until Thursday to prevent a bank run.
Just hours ahead of the vote in the country's 56-member Parliament, officials sought to limit the impact on small savers. They also hinted that the country was looking to limit the amount it has to raise from the grab on deposits.

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About 300 protesters gathered outside parliament, which was cordoned off by police.
A vote in favour of the bank account confiscation would have helped Cyprus get €10 billion ($12.9 billion) in rescue loans from its euro partners and the International Monetary Fund. The money will be used to prop up its banks.
A new draft bill discussed in Parliament's finance committee proposed to spare all deposits below €20,000 ($25,900). Those between €20,000 and €100,000 ($129,290) would still have a 6.75 per cent charge imposed, and those above €100,000 would have to give up 9.9 per cent of their deposits, in line with the original plan put forward over the weekend.
In a sign of the scale of disagreement over the deposit charge, the country's central bank governor, Panicos Demetriades, recommended that no accounts below €100,000 be touched. That level represents the amount of savings that are supposed to be insured if a bank collapses.
"The credibility of, and trust in the banking sector depends on this," said Demetriades, who conceded that he expects at least 10 per cent of deposits to be withdrawn when the banks eventually re-open.