Nicosia: Cyprus is scrambling to overhaul its banking sector to avoid financial meltdown, after the European Central Bank (ECB) threatened to pull the plug on emergency funding for the island's lenders.
Cypriot politicians have until Monday to approve a "Plan B" bailout deal with the European Union and International Monetary Fund (IMF) or face being choked from the ECB funds, which would likely cause teetering banks to collapse.
There was also intense pressure for a deal from the EU. One source warned that Cyprus risked expulsion from the eurozone if parliament failed to approve a workable plan to restructure its outsized banking sector by Tuesday.
But MPs adjourned an emergency session late on Thursday without voting on the first two bills in a package of draft legislation the government has drawn up as part of its revised plan.
They said they needed more time to study the plans to set up a "national solidarity fund" and impose capital controls to prevent a run on the banks when they reopen on Tuesday after more than a week.
The new solidarity scheme would nationalise pension funds, with bonds issued against future natural gas revenues. The second bill would "impose temporary restrictive measures on the movement of capital".
Central bank chief Panicos Demetriades said legislation had also been drafted on reorganising the Cypriot banking system.
"This consolidation process will prevent the risk of bank failures and protect in their entirety all insured deposits up to the amount of 100,000 euros ($129,000)," he said as he entered the presidential palace for emergency talks with the cabinet.
Lawmakers on Tuesday rejected a highly unpopular measure, which would have slapped a one-time levy of up to 9.9 per cent on bank deposits as a condition for the loan.
That forced the government to redraw a plan to resolve the chaos unleashed by an initial scheme to tax bank accounts by 5.8 billion euros ($7.47 billion) to complement 10 billion euros in eurozone and IMF loans between now and 2016.
Speaker of parliament Yiannakis Omirou insisted a revised levy on bank deposits was not on the table, a move seen as placating Russians who are believed to have more than $30 billion in private and corporate cash in Cyprus banks. Around 200 people protested outside the legislature, mostly employees of the Laiki or Cyprus Popular Bank, which is in the eye of the storm.