Most Cypriot banks will open tomorrow but capital controls remain and the two largest banks will remain shut while the ECB “monitors the situation” and regulators determine precise haircuts.

CNN Money reports Big Cyprus banks to stay shut after bailout

Most banks in Cyprus will open again Tuesday for the first time over a week. But the two biggest lenders at the heart of a €10 billion European Union rescue will stay shut for two more days to give regulators time to prepare for a run on deposits.

Deposits of over €100,000 at Bank of Cyprus and Popular Bank will be frozen until they have been restructured. Popular Bank will be split up, its viable assets and insured deposits transferred to Bank of Cyprus, and its non-performing loans moved into a bad bank that will be wound down.

Big depositors at Popular Bank face complete wipe out, along with shareholders and bondholders.

The losses facing big depositors as part of a deposit-equity conversion at Bank of Cyprus have yet to be determined but could be around 30%, a Cypriot government minister said Monday. Again, shareholders and bondholders will be tapped first.

The big unknown is how small depositors will react, or what restrictions they’ll face when they try to access their money from Tuesday. The Cypriot parliament last week gave the government powers to implement temporary capital controls.

Cyprus will be ruined for a decade. Expect GDP to plunge by as much as 30%.

Since Big depositors at Popular Bank face complete wipe out, Cyprus may as well have done this on its own and left the Euro.

Mike “Mish” Shedlock