Cypriot banks could suffer further losses if Greece decides it must leave the 17-nation eurozone, since they also hold an estimated €22 billion ($27.5 billion) in Greek business and household loans.
Compounding the island's banking troubles are projections that its economy will shrink by 1 percent of GDP this year.
Cyprus was split in 1974 when Turkey invaded after a coup by supporters of union with Greece. Only it's southern, internationally recognized Greek-speaking part enjoys EU membership. A breakaway Turkish Cypriot state in the north of the island is recognized only by Turkey, which maintains 35,000 troops there.
Derek Gatopoulos in Athens contributed to this report.
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