Cyprus has agreed a bailout deal with international creditors, becoming the fifth eurozone member to seek outside help in the ongoing debt crisis.
The country made the request to its European partners and the International Monetary Fund in June, for help to revive its banks.
Lenders have suffered huge losses due to their heavy exposure to Greece.
The deal, expected to include some 16bn euros (£13bn; $20bn) of loans, will be officially confirmed later on Friday.
But any deal would have to be ratified by parliaments in the eurozone countries.
“The deadline that was set by the European Central Bank for the recapitalisation of the banks expired, so we had to enter the (EU/IMF) rescue mechanism,” government spokesman Stefanos Stefanou told reporters.
Banks have lost large amounts on Greek government bonds. They are also facing big losses on loans made to businesses in Cyprus, which have been hit by the deep recession in neighbouring Greece, its biggest trading partner.
In total, Cypriot banks have outstanding liabilities and debt totalling 152bn euros, or eight times the size of the country’s gross domestic product, according to the IMF.
In June the country’s two largest lenders the Bank of Cyprus and Cyprus Popular Bank had asked for more than 2bn euros in government aid.
The Cypriot government has also been holding negotiations for a possible loan from a country outside the EU, such as Russia or China.
The country has already borrowed 2.5bn euros from Russia, whose business people are important customers of Cyprus’s relatively large offshore financial sector which offers low tax rates.
Cyprus’s stock exchange was up 8.5% after the announcement.
Cyprus is the fifth country in the 17-member euro area to accept emergency assistance as part of the ongoing debt crisis. Greece, Ireland, Portugal, and Spain, asked for bailouts, although the Spanish bailout for its banks was funded by the eurozone’s European Financial Stability Facility.
