Cyprus announced plans on Thursday to overhaul its banking industry and force losses on big depositors as the European Central Bank threatened to withdraw crucial funding if the island's government failed to agree on a bailout.
Panicos Demetriades, Central Bank of Cyprus governor, said parliament would be asked to wind up Laiki, the island's second lender, and split it into a "good" and "bad" bank, with larger deposits folded into the latter. "The banking system needs restructuring otherwise it will go bankrupt and it needs to be done immediately," Mr Demetriades said.
"By establishing this legal framework, resolution measures will be imposed on Popular Bank [Laiki] so that it will be in a position to continue to offer banking services to its clients."
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