Frantic Cypriots queued up at banks to drain their accounts. Russian oligarchs scrambled to repatriate hidden fortunes. European officials, fearing another bout of market contagion, orchestrated an audacious 17 billion euro rescue package — forcing depositors to bear a large part of the cost, unlike other bailouts.
Now, the foundation of the bailout, an analysis by bond giant Pimco, is being challenged by economists, lawyers and politicians in Cyprus. They argue that the analysis relied too heavily on aggressive financial assumptions that in some cases deviated from international accounting standards, thus inflating how much cash banks needed to survive.
The basis for the criticism comes from an unusual source: a separate BlackRock study commissioned by the Cypriot central bank shortly before Pimco issued its report. The central bank chief, voicing concerns over Pimco's models and its approach, asked BlackRock, the world's largest investor, to dissect the work of its rival.