The essential points of the deal, including the closure of Laiki Bank, and what this means for savers and the eurozone
Cyprus struck a last-minute bailout deal in the early hours of Monday morning, aimed at preventing the island becoming the first country forced out of the single European currency.
• Crucially, the new programme spares deposits below €100,000 (£85,500), unlike last week's proposals, which sparked outrage with a 6.75% tax on all bank depositors.
• Cyprus's second-largest bank, Laiki Bank will be closed. Its €4.2bn in deposits over €100,000 will be placed in a "bad bank", meaning they could be wiped out entirely. Those with smaller deposits at Laiki will see their accounts transferred to the Bank of Cyprus.
All lenders to Laiki will see their investments wiped out, in a first for a eurozone bailout. In other bailouts, holders of higher-rated bonds have not faced such losses.
• Bank of Cyprus survives the axe, but faces huge restructuring. No bailout money will be used to recapitalise the bank. Instead its shareholders and bondholders will be hit. It is thought depositors with over €100,000 at the bank will also be involved in the recapitalisation and face losses of around 30%.
Getting the bank up to healthy EU-mandated capital levels will be made harder by the fact that Bank of Cyprus will inherit a €9bn debt Laiki had with the European Central Bank.
Is my money safe in a UK branch of Laiki Bank?
The bank is saying it is "business as usual" for individuals and companies with money in its four UK branches.
It says its customers will not be transferred to Bank of Cyprus, even though it set up as a branch rather than a subsidiary. It is not restricting withdrawals and says customers should not panic.
But what if the bank had to close?
Customers are covered by the Cyprus deposit protection scheme up to €100,000. Laiki Bank UK is in talks with the Bank of England and Financial Services Authority about the status of savers with more.
What about Bank of Cyprus customers in the UK?
Bank of Cyprus's UK operation is a separate entity, incorporated in the UK, so customers are unaffected by any of the arrangements made in Cyprus. Customers are covered by the UK's Financial Services Compensation Scheme, so if anything did get wrong they would get the first £85,000 of their holdings returned, possibly within days.
How does the deal differ from the one on the table last week?
Two key differences: first, small depositors have been protected – with the EU's €100,000 legal guarantee upheld. Second, the plan does not have to be approved by the Cypriot parliament because losses on large depositors will be achieved by restructuring Cyprus's two largest banks and not by levying a "tax" on its citizens.
Who are the biggest losers?
Russian nationals are estimated to hold more than €20bn of the €68bn deposited in Cypriot banks and many have deposits over €100,000.
Laiki Bank was 84% owned by the Cypriot government, following a €1.8bn bailout in June last year. The rest is owned by private and institutional investors, including bank staff.
Laiki bondholders will be wiped out and lenders to the Bank of Cyprus will face heavy losses in the recapitalisation.
Thousands of staff at both Laiki and the Bank of Cyprus will lose their jobs.
What will happen when the banks open in Cyprus?
There will still be very tough restrictions on bank account access and the movement of cash out of Cyprus, to help prevent a bank run. The European commission said these capital controls will only be enacted "exceptionally and temporarily", as requested by the Cypriot authorities.
The fear is that Cypriot savers will be sufficiently worried by the past week's events that, when they are finally allowed to, they will take their money out regardless of the guarantee that deposits up to €100,000 are safe.
Will this be the end of Cyprus's problems?
No. In fact, analysts say it is only the beginning. Cyprus has benefited for years from attracting the deposits of wealthy individuals from around the eurozone. That business model is now broken and the country has nothing to replace it with. Tellingly, the EU gave no economic projections for Cyprus in its statement.
Gary Jenkins of Swordfish Research said: "The economy is crushed for the next God knows how many years. As soon as people can take their money out the banks, they will take it out. Confidence has disappeared. Who's going to want to do business with Cypriot corporates right now?"
Will Cyprus need another bailout?
Possibly. The €10bn bailout raises Cyprus's debt to around 143% of GDP. With GDP likely to fall dramatically over the next few years, that ratio could start to look even more perilous.
A deal to restructure Cyprus's debt by hitting private bondholders would go against EU promises that the Greek deal of that kind was an exception.
All of which prompts analysts at UBS to suggest Cyprus's eurozone partners might have to get involved again some time in the future. They write: "In other words, we see a risk that this bailout for Cyprus might not have been the last one."
Will this be the model for future bailouts?
It is impossible to say. So far, no two eurozone bailouts have been the same. Policymakers appear to react to events, rather than follow a fixed plan. The danger is that no one is paying attention to the unintended consequences.
What could the unintended consequences of this particular plan be?
With their initial plan to tax all depositors, policymakers made it clear that they would, in certain circumstances, be prepared to take that money. Even though they did not go through with it, this will likely shake confidence in the banks if the financial crisis re-escalates in other countries, such as Spain or Italy.
Meanwhile, larger depositors and foreign companies with money in Spain and Italy are likely to start shifting that elsewhere, fearing that the Cyprus deal will be a model for future bailouts, further damaging already weak financial institutions.
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