IPE: Cypriot pension funds still hold half of €4 billion assets in deposits

18 March 2013

The looming bailout of Cyprus is likely to hit local pension funds hard, as Schroders warned that the conditions imposed by the European Commission would make a "mockery" of existing deposit protection schemes.

Cypriot  pension funds traditionally deposit large amounts of scheme assets with the local banks, which would see a cash injection under the terms of the proposed €16 billion package – with around €6 billion to come from a tax of deposits.

According to statistics by the Central Bank of Cyprus, insurance companies and pension funds held €4.3 billion of member cash in deposits at the end of January. The figure was down from a five-year high of €4.5 billion in July 2012, but noticeably up from the €2.1 billion recorded by the central bank at the end of 2006.  

Reaction to the proposal that depositors would be taxed on their holdings will cause concern in Greece, Ireland, Portugal, Spain and Italy (GIPSI), with GK Research saying it could signal "a whole new phase" of the eurozone crisis.

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