He says there were 2 unintended consequences. One, ownership of banks moved to oligarchs and two, central bank independence was attacked:
There were two unintended, albeit related, consequences of the bail-in which proved more toxic than could ever have been imagined.5
The bail-in of uninsured depositors can result in unpredictable switches in ownership in the resolved institution. The new owners may not want to own a bank and may also not be fit and proper to do so. This is the first unintended consequence of the new bank resolution framework.
In the case of Cyprus, the ten largest new shareholders turned out to be politically exposed Russian and Ukrainian oligarchs (one of them, who eventually became the bank’s vice president, was described by Reuters news agency6 as a close ally of the Russian president). In addition, the ten largest shareholders were represented by the top five Cypriot law firms, all of which were politically connected (one belonged to the family of the then newly elected Cypriot president).
Not surprisingly, the fitness and probity checks that are normally conducted quietly behind the scenes by the supervisor turned out to be beyond surreal. Suffice to say that they became headline news in the local media and generated a toxic political climate against the central bank and its governor.7 This was in addition to the political pressures on the central bank aimed at reducing the bail-in percentage. If heeded, these pressures would have resulted in an under-capitalised bank, with unimaginable consequences.
The erosion of the independence of the central bank that followed these political attacks was the second unintended consequence of the bail-in. It included legislative amendments to the central bank’s governance structure that undermined its decision-making powers and changes to the resolution legislation that shifted powers from the central bank to the government. These amendments were voted in by Parliament in the summer of 2013, notwithstanding an ECB legal opinion8 warning against their enactment.
These developments, which I analysed in Demetriades (2017b), have brought to the surface some less well-known legal limitations in the scope of central bank independence, if not the ECB’s reluctance to take more drastic action.
Mersch (2017), for example, explains that tasks and functions conferred on the ECB by secondary legislation after the crisis (for example, micro- and macroprudential supervision, and financial crisis management) are not covered by the very high level of independence provided to the ECB under the Treaty for the pursuit of its primary objective of price stability. While there may be sound legal and historical reasons why this is the case, the economic case for delegating banking supervision or financial crisis management to independent central bankers is not dissimilar to that of monetary policy. If anything, the experience from the management of the crisis in Cyprus confirmed that an independent central bank was better placed than politicians to take time-consistent actions that were politically costly in the short term but beneficial in the longer term.
Banking woes have only become worse since the crisis.
Mostly Economics 
