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The central bank in Cyprus confirmed the details of the haircut for big accounts (over 100K) in the Bank of Cyprus. The money will be split to three parts, each with a different treatment.

Depositors will receive bank shares worth 37.5% of their deposits over 100K euros.

A further 22.5% of these deposits will not carry any interest and may be turned into a special instrument that might be used to recapitalize the bank later on. Another 40% will carry interest, but will be locked. A special committee will later decide what to do with this money.

Deposits will probably be offset against any loans the depositor has. The decisive time for the calculations has been set March 26th, 10PM local time.

The head of the Eurogroup, Dutch finance minister Joeren Dijsselbloem, said in interview that what has been done in Cyprus could be done elsewhere. He later backtracked these comments, and other leaders repeated that Cyprus is a special case.

The original plan was to tax deposits of all sizes and at all banks in Cyprus: 6.7% for accounts under 100K and 9.9% for the bigger ones.

Both the original plan and Dijsselbloem’s words haven’t helped the European banking sector nor the euro.

For more about the euro, see the EUR/USD forecast.

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