Cyprus Banking Crisis & Bail-In

Cyprus became the first eurozone country to impose capital controls and the first to apply a bail-in to bank depositors. The crisis resulted directly from Cypriot banks' massive exposure to Greek sovereign bonds through the Greek PSI.

Banking sector concentration (banks = 900% GDP) + single-country bond concentration (Greek bonds) + PSI loss → insolvency → bail-in as only feasible solution.

Cypriot banks' Greek bond holdings were a matter of public record. The Greek PSI haircut of 53.5% in 2012 made Cypriot banking insolvency mathematically certain from the moment of the PSI.