Cyprus bank levy bailout would ‘undermine trust’

THE possibility of a levy on bank accounts in Cyprus to fund a bailout goes to the heart of trust in banks, Ed Miliband said today.

• Levying bank savings to fund Cypriot bailout would undermine trust in system, Ed Miliband has said

• David Cameron insisted that British citizens with savings in Cypriot banks would not lose out

The Labour leader demanded to know what the Government knew and when about the plan, which was rejected in its current form by the Cypriot parliament yesterday.

Answering Prime Minister’s Questions Mr Cameron repeated guarantees that any British personnel, be they military or civilian, sent to work in Cyprus by the Government will not lose out on earnings or savings because of the situation.

He said there was little to be done for the “many thousands” of British citizens on the island who have savings in Cypriot banks but added a hold on pension payments would continue until the situation was clear.

Mr Cameron said: “It is worth noting because of the deal I did in Brussels getting us out of the bailout fund, we will not be contributing the otherwise perhaps up to £1 billion we would be contributing under the previous government’s plans.

“Obviously what we are doing is now waiting to see the action the Cypriot government and the euro group will agree and making sure we do everything to help British citizens in the weeks ahead.”

Mr Miliband said: “This is not just a matter for the eurozone, but for other European economies because it goes to trust in the banking system.

“I think it should have been obvious to everyone a sudden levy imposed on ordinary savers would undermine basic trust and confidence in banks.

“Could you send a clear message that any negotiated bailout that is going to be subsequently agreed with the government of Cyprus needs to rebuild trust in the banking system and not undermine it further?”

Mr Cameron replied: “We have made our views very clear to the Cypriot government.

“Our view is when you have a deposit protection scheme as we have in this country, as all of Europe put in place after the crash of Lehman Brothers, those deposit protections schemes should be respected - that is the whole point, that is why they are there for small savers.”