IMF Chief has not ruled out Bail-In option for Cyprus bank depositors

After the recent G20 meeting, the IMF Chief Christine Lagarde has not ruled out a possibility of Bail-In of Cyprus bank. A Bail-In means that Cyprus bank depositors will lose part of their deposits as a measure of saving Cyprus banks. The previous Cyprus government had never considered this outcome when it was deliberately delaying negotiations with the Troika.

If the Bail-In happens, it will have a drastic effect on the Cyprus banking system which is a haven for Russian money. The Russian officials have voiced their concern with this approach. The Russian officials are not alone in caution from Troika on this move. The credit rating agency Moody is saying that this might lead to a knock off effect on entire Eurozone banking system as this will demonstrate a move from use the EU funds to save struggling banks to shifting responsibility for it on depositors.

At this moment, the Bail-In is under consideration of non-insured deposits in the troubled Cyprus banks. The European Central Bank (ECB) is currently offering an insurance up to €100,000 per client.