Cyprus's bank bail-in and bailout

Cypriot banks had grown far larger than the island's economy by attracting foreign deposits and investing heavily in Greek government bonds and overleveraged domestic property lending, leaving them acutely exposed when Greece's own debt crisis forced a restructuring that wiped out much of the value of those Greek bond holdings. As losses mounted and credit-rating agencies cut Cyprus to junk status, the country lost market access and turned to the eurozone and IMF for help. The €10 billion bailout agreed on March 25, 2013 came with an unprecedented condition: rather than relying solely on taxpayer-funded support, uninsured depositors — those with more than €100,000 — at the country's largest banks took direct losses through a 'bail-in,' with the troubled Cyprus Popular Bank (Laiki) shut down entirely and roughly 48% of large uninsured deposits at the Bank of Cyprus seized to recapitalize it. Cyprus also imposed capital controls to prevent a bank run once the terms became public, the first time such controls had been used inside the eurozone.