Officials from Cyprus insist that its bank's activities are above board, but Germany has insisted on an audit, as claims have been made repeatedly that Cypriot banks are involved in money laundering for organized crime groups in Russia.
The country's banks have assets valued at $156.2 billion, about seven times the size of the country's gross domestic product, EUobserver reported Tuesday.
While Eurogroup President Jeroen Djisselbloem has said that a bailout agreement is in "well advanced" stages, it has yet to be determined whether or not private creditors in Cyprus will be asked to accept losses on their holdings.
Some officials are pressing the point that private investors will have to take a loss if the banks are holding a significant amount of ill-gotten gains. Others have said putting depositors on the line could create a run on Cypriot banks.
The European Commission has also said that option, which was employed for the bailout for Greece, was "unique" to the Greek bailout.
In February, European Commission economic affairs minister Olli Rehn said, "the commission is not working on any private sector involvement option for Cyprus."
There is also some confusion on who would do the audit.
Djisselbloem said a private firm would audit the banks, but officials in Cyprus said it would be done by Moneyval, a Council of Europe agency that investigates finances related to money laundering and terrorism.
The agency has already cleared Cypriot banks of money laundering suspicions on four previous occasions, EUobserver said.