Cypriot parliament cancels debate on deposits levy

The Cypriot parliament has canceled a debate on legislation imposing a levy on bank deposits on Saturday, as daylong negotiations with international lenders on a bailout dragged into the night.Cyprus President Nicos Anastasiades conferred late in the day with the leaders of the troika, namely the European Commission, the European Central Bank and the International Monetary Fund, and later invited the leaders of parliamentary parties to a night meeting to brief them on the outcome.Sources at the presidential palace where the meeting is being held said it could be a sign that an announcement about a bailout deal may be imminent.The same sources said Saturday's negotiations centered on a levy to be imposed on deposits in the Bank of Cyprus, the island's largest lender.An alternative option to impose a low levy on deposits in about 26 foreign banks operating in Cyprus was abandoned as potentially wrought with problems, including legal ones.The state broadcaster said that abandoning the option to tax all deposits would possibly mean increasing the levy to up to 25 percent on Bank of Cyprus deposits over 100,000 euros (about 129,000 U.S. dollars), so as to generate about 2.8 billion euros.This amount will compliment assets totaling 3 billion euros out of selling the Greek units of Cypriot banks and the planned investment fund.Meanwhile according to the latest development, a bailout agreement for Cyprus expected to be announced soon provides for a partial swap of deposits in the Bank of Cyprus with bank shares, sources close to the ongoing bailout talks said late Saturday.Prodromos Prodromou, a ruling DISY party parliamentarian, said that under an agreement between Cypriot authorities and European Union and International Monetary Fund negotiators, 20 percent of deposits over 100,000 euros will be exchanged with bank stock.He also said that a plan under consideration provides for a merger involving the Bank of Cyprus and the "good" part of the Cyprus Popular Bank which will take over guaranteed deposits below 100,000 euros and good debts.It is still unclear if depositors in other banks will take a loss, as the agreement is still being debated at a meeting of parliamentary party leaders under President Nicos Anastasiades.Still unconfirmed reports suggested that deposits of over 100,000 euros in other lenders except Bank of Cyprus will be burdened with a 4-percent levy. It is also still unclear whether this levy will be imposed on deposits in about 26 foreign banks operating in Cyprus.The troika had set a condition for Cyprus to raise itself 5.8 billion euros before approving a 10-billion-euro bailout so as to keep the total sovereign debt down to a mark which would make it manageable. (1 euro = 1.29 U.S. dollars)