When Cyprus and the Eurogroup (consisting of finance ministers of the EU member states having the Euro as their currency) decided on the terms of a memorandum of understanding with Troika (consisting of the European Commission, the European Central Bank and the International Monetary Fund) the whole world was taken by surprise. Not because Cyprus needed to reorganise its credit and financial institutions, but rather because of the measures decided upon for implementing such reorganisation.
Cyprus resolution measures -
The initial decision between Cyprus and the Eurogroup was viewed as completely unjustified and would have required all depositors in financial institutions licensed to carry out banking activities in Cyprus to contribute by way of bail-in anything from 6.75 per cent to 10 per cent of their deposits with such institutions. The Cypriot parliament, being the legislative body, did not accept the passing of a law which would have facilitated the above. A new agreement between the Eurogroup and Cyprus as to the terms of the Troika Memorandum of Understanding was finally sanctioned by the Cypriot parliament and to facilitate its implementation the following main pieces of legislation were passed:
• Law No. 17(I) of 2013 on the Resolution and Other Institutions Law (the “Resolution Law”); and
• Law No. 12(I) of 2013 on the Imposition of Restrictive Measures in Transactions in Situations of Emergency (the “Restrictive Measures Law”).
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