The Central Bank of Cyprus has announced that it is drafting regulations to create a financial stability fund, which should be in place within six months.
The creation of the fund is included in a draft law awaiting legislative approval, which also provides for a two-year, levy of 0.095% on deposits with commercial and cooperative bank deposits. This is projected to raise €120 million, of which €70 million will be used to reduce the fiscal deficit and €50 million will be paid into the stability fund. After the initial two-year period, the amount to be paid into the fund will be determined by the Central Bank of Cyprus.
The Governor of the Central Bank of Cyprus has stated that in order for the fund to be effective it will need to be in the order of €500 million, approximately 3% of GDP.