Savers who have money on deposit with the UK branch of Bank of Cyprus will not be hit with the proposed levies that have come as part of the country’s bailout.
Cyprus is to receive a £8.7bn bailout from the European Union, but in return savers with money on deposit in Cypriot banks face a one-off levy, depending on how much they have in the bank.
Those with under 100,000 euros face a levy of 6.75%, while those with over 100,000 euros face a levy of 9.9%.
However, deposits with the UK arm of Bank of Cyprus and Laiki Bank will not face the levy. Bank of Cyprus UK is registered and authorised by the Financial Services Authority (FSA) and savings are protected up to £85,000 by the UK’s Financial Services Compensation Scheme (FSCS).
Find out more about the crisis in the eurozone and how it will affect your money.
Who is affected by the Cyprus bailout?
Laiki UK is another Cypriot bank that operates in the UK. Its customers will not be subject to the levy, but it states on its website: ‘Your eligible deposits with Laiki Bank UK are protected up to a total of 100,000 euro (£87,000) by the Cyprus Deposit Protection Scheme and are not protected by the UK Financial Services Compensation Scheme.’
However, British people who have moved to or live in Cyprus, along with Cypriot nationals and others living in the country, will face the one-off levy.
The British government has announced that anyone with no choice but to live in Cyprus, such as British government and military personnel, will be protected from any levy. On Sunday, the Chancellor George Osborne stated that this group of British people – thought to number around 3,000 – will be compensated for any losses.
What will paying the levy mean for savers?
Savers with under 100,000 euros face a one-off tax of 6.75% of their savings. Those with over 100,000 euros face a one-off tax of 9.9%. In return for this, they will be compensated with equivalent amount in shares by the banks that they have their deposits with.
But with Cypriot banks being central to the need for a bailout in the country, it may take a long time for those shares to be of value, or able to be resold, by their new owners.