UK Working to Shield UK Branches from Cyprus Bailout - Osborne

By Jason Douglas and Paul Hannon

LONDON--Britain is seeking to shield depositors in U.K. branches of Cyprus Popular Bank PCL (CPB.CP) from contributing to the island's bailout, U.K. Chancellor of the Exchequer George Osborne said on Tuesday.

Mr. Osborne told a panel of lawmakers tasked with scrutinizing economic policy in the U.K. that Bank of Cyprus PCL (BOCY.CP) has an established U.K. subsidiary and its depositors are covered by the U.K. deposit insurance regime.

But Cyprus Popular Bank only has branches, he said, which means its depositors are covered by Cyprus's deposit insurance scheme. Depositors with more than 100,000 euros ($128,530) in Cypriot banks could face losses of up to 40% as part of a bailout for the crisis-hit euro-zone nation, Cyprus's Finance Minister Michael Sarris said earlier Tuesday.

"We are engaged in negotiations to try and avoid the branches of the Cyprus Popular Bank in the U.K. becoming sucked into the Cypriot resolution process," Mr. Osborne said.

Mr. Osborne said British ministers made it clear to their counterparts internationally that they thought an earlier plan to tax insured deposits in Cypriot banks was a bad idea. Mr. Osborne said he spoke to International Monetary Fund Managing Director Christine Lagarde about the proposals, while Prime Minister David Cameron discussed it with Russian President Vladimir Putin.

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