As part of the weekend's Cyprus parliamentary vote-bypassing "bank resolution", we learned that the second largest Cyprus bank, Laiki, will be liquidated, with the bulk of its good assets rolled into what would remain of the first and only remaining major bank in the island: Bank of Cyprus (whose uninsured depositors would also suffer a haircut, but supposedly a smaller one, less than 30%). Then, in a very surprising move overnight, news hit that the Chairman of this last standing bank [4], Andreas Artemis, has tendered his resignation.
Why now, when everything is supposedly fixed and when the impression of stability is paramount? Perhaps the reason is that as CNBC's Michelle Caruso-Cabrera reports from Cyprus, there is now an rumor that the "other" bank - Bank of Cyprus - may also be on the verge of liquidation.
While this is unsubstantiated for now, it would make sense in the aftermath of yesterday's confusing announcement of a select bank reopening today, followed hours later by an extension of the bank closure through Thursday (at least, likely longer), but more importantly, following reports that Russian depositors may have already long pulled out their cash [5]from Cyprus, meaning not even full impairments on all uninsured depositors will be enough to cover the capital shortfall, with the only option being impairment of the insured depositors after all... or bank closure.
Keep a close eye on what happens here next because if the only remaining "good" Cypriot bank is shuttered, then the entire European bailout package, cobbled in the last hours of Sunday, goes poof.
From Michelle Caruso-Cabrera [6]:
[7]
Bank of Cyprus employees now inside. They are here because of rumors that BofC will be liquidated like Laiki Bank.