Forgive me it was a while ago, memory fades, and I lack your intimate knowledge of the banking system, nomenclature and practices but from wiki,
https://en.wikipedia.org/wiki/Greek_...nt-debt_crisis
'A year later, a worsened recession along with the poor performance of the Greek government in achieving the conditions of the agreed bailout, forced a second bailout. In July 2011, private creditors agreed to a voluntary haircut of 21 percent on their Greek debt, but Euro zone officials considered this write-down to be insufficient.[115] Especially Wolfgang Schäuble, the German finance minister, and Angela Merkel, the German chancellor, "pushed private creditors to accept a 50 percent loss on their Greek bonds",[116] while Jean-Claude Trichet of the European Central Bank had long opposed a haircut for private investors, "fearing that it could undermine the vulnerable European banking system".[116] When private investors agreed to accept bigger losses, the Troika launched the second bailout worth €130 billion.'
The Cypriot Banks were I believe overexposed to Greek debt, their own choice, but then when the hammer fell and the haircut of 50 percent was forced upon them as part of the larger Greek bailout this further undermined the already fragile Cypriot banks, might that be a more accurate laymans summary...also seem to recollect the Dutch finance minister Djisselbloem made some kind of faux pas in the handling of the crisis earning him the moniker Dieselbomb in some quarters, still ancient history now.