ECONOMY

Cypriot bank deposits fell in March amid bailout talks

Cypriot banks lost 1.8 billion euros ($2.4 billion) in deposits in March, when the Mediterranean island agreed to tax bank deposits as part of a European Union-led bailout.

Deposits decreased 3.9 percent from February, when they dropped 2.2 percent, European Central Bank data showed on Friday. That’s the 10th straight decline. Cypriot deposits in March totaled 44.6 billion euros, down from 46.4 billion euros the previous month.

Cypriot officials, euro-area finance ministers and the ECB agreed mid-March on an unprecedented measure to impose a levy on deposits of less than 100,000 euros under a 10 billion-euro bailout. The plan was ditched after the country’s parliament rejected it, and a new accord was reached imposing a tax only on deposits above 100,000 euros.

The episode damaged investor confidence across the euro region. The Stoxx Europe 600 Banks Index dropped 6.8 percent between March 15 and March 27, the day before banks reopened in Cyprus with limits on withdrawals.

“We’re not seeing stress on bank deposits following the Cyprus bailout,” ECB Executive Board member Benoit Coeure said on Thursday.

[Bloomberg]