Cyprus MPs set to vote on bank restructuring proposal

MPs in Cyprus are expected to vote on a new proposal to radically restructure the island's banking sector, as it teeters on the brink of financial collapse.

The European Central Bank has given the country until Monday to find a solution to avoid bankruptcy.

Laiki Bank, also known as Cyprus' Popular Bank, could be split into a "good" and "bad" bank.

The bank yesterday lowered the daily limit on ATM withdrawals to €260, amid reports of long lines of jittery customers and clashes with bank employees.

The Wall St Journal is reporting that Cyprus is planning to split Laiki’s assets into good and bad units and then merge the good assets with the country’s largest lender, the Bank of Cyprus.

The Central Bank of Cyprus announced a resolution process that would avert bankruptcy and protect depositors with up to €100,000, the central bank governor said.

The measures will be imposed on Laiki and failure to do will render the bank bankrupt.

Earlier, the ECB said it will pull the plug on its Emergency Lending Assistance program to the Central Bank of Cyprus if the country doesn't reach a deal by Monday.