(CNN) -- Eurozone finance ministers Saturday granted a $13 billion bailout package to Cyprus as it grapples with a bloated financial sector that is threatening the region's economy.
The Mediterranean Island's banking system has become "fragile" because of "its very large size relative to the country's GDP" and must be downsized, the Eurogroup said in a statement announcing the 10 billion euro bailout.
Cyprus has a population of just over 1 million people, according to the World Bank, and has a reputation as a haven for offshore banking. At least 35 banks from around the world have branches there, according to the Central Bank of Cyprus.
The Island will also have to agree to take steps to prevent money laundering, privatize the banking system and inject it with funds to recapitalize it, the according to the statement.
All holders of bank accounts in Cyprus -- both residents and nonresidents -- will be required to pay a new tax.
The Eurogroup projects the Island's public debt will reach 100% of gross domestic product in 2020. It is asking the International Monetary Fund to contribute to the bailout.
The ministers deemed the deal necessary to stabilize the Cypriot economy and prevent damage to the closely connected Greek banking system.