Bank of Cyprus clients could lose up to 60% of their savings

Large depositors stand to lose up to 60 percent of their savings as Cyprus enforces the controversial conditions of a €10-billion bank bailout from the eurozone and the International Monetary Fund.

Officials said that deposits over €100,000 ($128,225) at the country's largest bank will lose 37.5 percent of their value after being converted into bank shares. The losses could increase by another 22.5 percentage points if it is decided the bank were to need further injections of cash.

Investors with deposits under €100,000 will reportedly not be required to participate in the scheme.

Anger is mounting in the country as Cypriots protest the dissolving of the second-largest bank – Cyprus Popular Bank, also known as Laiki – and what they are calling a theft of their assets. Under the terms of the deal, the assets of Laiki bank will be transferred to Bank of Cyprus.

Cash withdrawals from banks have been limited to €300 a day, while only €1,000 in cash can be taken out of the country and there are restrictions on the use of credit cards abroad.

At Bank of Cyprus, about 22.5 percent of deposits in excess of 100,000 euros will earn no interest. The remainder of the account will continue to generate interest, but will not be repaid until the bank shows a strong performance.

Daniel Wagner, CEO of Country Risk Solutions, says the latter is very unlikely to happen.

“If the bank can pull a rabbit out of a hat, and somehow make what appears to be near worthless shares somehow very valuable, then these depositors have some hope that they’ll be receiving some of their money back,” Wagner told RT

Those with deposits less than 100,000 euros will be protected under the Cyprus deposit guarantee.

On Friday, Cypriot President Nicos Anastasiades defended the 10-billion euro bailout deal agreed with the EU five days ago saying it would stabilize the country.

"We have no intention of leaving the euro," adding "in no way will we experiment with the future of our country," Anastasiades said.

But Wagner questions if the integrity of the banks and indeed government policies can withstand such harsh measures.

“If this can somehow be properly managed and people have some kind of degree of confidence in the process, fine, then all of this can be kept together. But if not, this could well be a slow steady deterioration throughout the continent about the value of an average bank deposit.”

Among other measures rumored to be taken to deal with crisis in the country are 20-30 per cent wage cuts for all public sector workers. Cypriot Finance Minister Michael Sarris, however, denied the reports, but said that in some sectors the state will need to cut salaries to prevent layoffs.