Parliament passes Solidarity Fund budget

Parliament approved on Friday a supplementary budget which provides for the allocation of €25 million in taxpayers’ money to the (National) Solidarity Fund to compensate bondholders and depositors of Laiki Bank, the Cyprus New Agency (CNA) reported.

Following a proposal from Speaker Demetris Syllouris, the amount was earmarked for further consideration pending a debate on the change of the purpose of the fund. The parliament rejected a proposal by Green lawmaker Giorgos Perdikis for an express debate.

The cabinet decided three months before the presidential elections to use the Solidarity Fund, which was initially set up immediately after the 2013 banking crisis to help recapitalise banks. The budget was passed with 21 votes in favour and 17 abstentions.

The Solidarity Fund has currently €10m in reserves.

Investors who bought contingent convertible bonds issued by Bank of Cyprus and Cyprus Popular Bank in the years preceding the 2013 banking crisis, lost €1.5 billion when they were converted into equity. Still, this was insufficient to prevent Laiki from going out of business and Bank of Cyprus had to convert almost half of its customers’ uninsured deposits into equity to remain afloat. Depositors at both banks lost €8bn

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