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Cyprus parliament has voted to restructure the island’s banks, set up a “national solidarity fund”, and establish capital controls to prevent a bank run.

Efforts continue to reach consensus on other key issues such as levies on bank deposits.

Cypriot President Nicos Anastasiades is to hold talks in Brussels with the EU before Cyprus’s parliament reconvenes.

Cyprus needs to raise 5.8 billion euros ($7.5 billion) to qualify for a 10 billion-euro bailout.

On Friday, the Cypriot parliament passed a total of nine bills, covering three main elements of the rescue plan including:

  • Restructuring of the banking sector, starting with the most troubled bank of all – Laiki (Popular) Bank, the country’s second largest
  • The creation of a solidarity fund: nationalizing pension funds and other state assets
  • The approval of capital controls to prevent large fund withdrawals out of Cyprus
    Cyprus parliament has voted to restructure the island's banks

    Cyprus parliament has voted to restructure the island’s banks

The bank levy issue may come before parliament later in the weekend. A levy, possibly of around 15%, on all deposits over 100,000 euros, has been suggested.

The “solidarity fund” would allow the pooling of state assets for an emergency bond issue, reports the Reuters news agency.

These include future gas revenues and some pension funds – an idea that German Chancellor Angela Merkel has strongly condemned.

Under the bank restructuring, Cyprus’ troubled lenders will be split into so-called good and bad banks.

Before the series of much-delayed votes in an emergency session of parliament, the European Union, Germany and leading bankers all urged MPs to speedily pass the reforms.

Eurozone finance ministers have called a meeting on Sunday to discuss the Cyprus crisis.

The European Central Bank has given Cyprus until Monday to raise the bailout money, or it says it will cut off funds to the banks, meaning they would collapse, possibly pushing the country out of the eurozone.

The EU has postponed next week’s summit to discuss free trade with Japan, so European leaders can concentrate on trying to solve the Cyprus crisis.

Cyprus banks have been closed since Monday and many businesses are only taking payment in cash.

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Cyprus parliament has approved a “national solidarity fund” to ease the banking crisis, which has hit confidence across the eurozone.

MPs also imposed capital controls to prevent a run on the island’s troubled banks.

These are the first of a series of laws intended to raise the 5.8 billion euros ($7.5 billion) Cyprus needs to qualify for a 10 billion-euro bailout.

MPs are still to decide whether to impose a levy on large bank deposits.

The fund would allow the pooling of state assets for an emergency bond issue, reports the Reuters news agency.

Parliament on Tuesday rejected a levy on all deposits to raise the money.

Before the series of much-delayed votes in an emergency session of parliament, the European Union, Germany and leading bankers all urged MPs to speedily pass the reforms.

Cyprus parliament has approved a "national solidarity fund" to ease the banking crisis

Cyprus parliament has approved a “national solidarity fund” to ease the banking crisis

The European Central Bank has given Cyprus until Monday to find a solution, or it says it will stop transferring money to its undercapitalized banks.

The EU has postponed next week’s summit to discuss free trade with Japan, so European leaders can concentrate on trying to solve the Cyprus crisis.

Banks on the island have been closed since Monday and many businesses are only taking payment in cash.

There were protests outside parliament on Friday.

Before the parliamentary session began, government spokesman Christos Stylianides said the authorities were engaged in “hard negotiations with the troika”, referring to the EU, the European Central Bank and the International Monetary Fund, the AFP news agency reports.

German Chancellor Angela Merkel warned Cyprus not to “exhaust the patience of its eurozone partners”, reports say.

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