Cypriot lender Bank of Cyprus will release €950 million in time deposits frozen under a recapitalisation arrangement last year which bailed-in its own depositors.

It is the first major release of funds since the Cypriot bank seized 47.5 per cent of uninsured deposits exceeding €100,000 and converted them into equity, giving its clients, including many wealthy Russians, a stake in the bank.

Part of the remaining amounts were placed in six, nine- and 12-month time deposits, with the bank maintaining the right to renew them automatically. The six-month time deposits mature on January 31st.

An “improving liquidity position” and “stabilising signs of its deposit base” were the decisive reasons that deposits were released, the bank said.

Bank of Cyprus is to date the only bank in the euro zone which used its own clients’ savings to recapitalise, instead of burdening the taxpayer. The process, known as a “bail-in”, was a condition for Cyprus to receive €10 billion in aid from international lenders, along with the closure of another loss-making major bank.

The released funds will be subject to capital controls applicable in Cyprus, enforced last year to prevent money fleeing the island in the wake of the bailout.

Reuters