Rather than make Europe's taxpayers foot the entire bill for bad banking, Cyprus and the 16 countries agreed to make the banks' bondholders and big depositors contribute to the rescue. One bank, Laiki, is to be split up, with nonperforming loans and toxic assets going into a "bad bank." The healthy side will be absorbed into the Bank of Cyprus. Savers with more than 100,000 euros in both banks will face losses possibly up to 80 cents on the euro.
Depositors and investors have taken note of the deal and are warily looking at other eurozone countries where the financial sector appears too big or too unstable.
Countries whose banks are under new scrutiny include:
Slovenia. Privately owned banks are suffering from a burst real estate bubble and unpaid property loans. The country, 0.4 percent of the eurozone's overall economy, has a relatively small banking system and has relied on successful exporters such as home-appliance maker Gorenje. But the banks' troubles are large enough that the government has struggled to borrow to finance its deficits; some think it might seek a bailout.
Malta. Like Cyprus, this is a small island country with a big banking system, eight times annual GDP. Banks have not suffered similar huge losses on government bonds, but the International Monetary Fund has warned that the size of the banking sector and its interconnectedness to the eurozone could mean trouble.
Luxembourg. Its banking system is more than 20 times the size of the economy. Germany has insisted that Cyprus, as part of its rescue, shrink its banking system to the European Union average, about 31/2 times GDP, and abandon its business model of seeking prosperity as a financial center for foreign savers and investors. Luxembourg, which accounts for only 0.4 percent of the eurozone, has followed a similar business model.