Cyprus Official Sees Risk of Levy Vote Delay

NICOSIA, Cyprus--A Cyprus parliamentary vote on a controversial bank deposit levy--a precondition for a 10 billion euro ($12.93 billion) bailout--could be delayed further and might force banks on the island to remain closed for longer than planned, a senior finance ministry official warned Tuesday.

The finance ministry--which yesterday ordered a two-day extension to the island's bank holiday--was taking a "wait and see" approach as to whether the vote would go ahead as planned later Tuesday, said Andreas Charalambous, the ministry's director of finance.

"The original schedule was to have a discussion and decision this afternoon but we have to wait and see," Mr. Charalambous said at a briefing.

"We don't like that we need to close banks and we will try to make this period as brief as possible," he added. "But the ultimate decision on when to return back to normality and at which pace needs to be taken after a decision is taken in parliament and after we have at [a] technical and political level assessed the situation. We want to open banks in two days."

On Monday, Cyprus's parliament pushed back for a second time in as many days a debate on the bank levy as the government scrambled to secure votes in parliament for the measure.

The levy was initially seen placing a tax ranging from 6.75% to 9.9% on all bank deposit holders, in order to raise EUR5.8 billion for the cash-strapped banks. But in amended legislation sent to parliament Tuesday, the government said it would exempt small savers with less than EUR20,000.

Cyprus's two largest banks--Cyprus Popular Bank Pcl (CPB.CP) and Bank of Cyprus Pcl (BOC.CP)--are also facing a liquidity crunch and the risk of massive withdrawals when they do eventually reopen for business, now tentatively set for Thursday.

In his remarks, Mr. Charalambous tried to ease concerns, saying the European Central Bank has indicated it would help keep the banks afloat.

"I've heard comments by ECB officials that indicate that if the law goes through they will provide unlimited liquidity assistance to banks," he said.

Write to Matina Stevis at [e-mail] and Alkman Granitsas at [e-mail]

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