Greek branches of troubled Cypriot banks will be acquired by the country's third-biggest bank, Piraeus Bank, to protect them from the crisis in Cyprus.

The Greek units of the Bank of Cyprus and Laiki Bank, if sold, would be spared from the bank levy proposed in the bailout plan. The banks employ about 4,300 people in a combined network of nearly 300 branches.

Though details of the transaction were not disclosed by Piraeus and Hellenic Financial Stability Fund (HFSF), Greece's bank bailout fund, it involves €17bn (£14.5bn, $22bn) of loans and €14bn of deposits, according to a Reuters report.

The sale, which has been backed by the governments of Greece and Cyprus, is subject to approval by the European Union's Directorate General for Competition.

The sale was part of an alternative plan by Cypriot authorities to secure a €10bn bailout deal from the troika of lenders that include the European Union, European Central Bank (ECB) and the International Monetary Fund (IMF). An earlier bailout plan proposed by the lenders included a levy on bank deposits: it was rejected by the Cyprus parliament and sparked mass protests.

The island nation has to secure €5.8bn on its own as a condition to get the bailout fund, without which the country's financial system will collapse when its banks reopen on Tuesday after a 10-day closure.

Cypriot officials are working hard to propose an alternative plan and present it to the eurozone finance ministers, who will assess it on Sunday.

The proposed plan involves restructuring the banking sector and setting up a "solidarity fund" to pool state assets for an emergency bond issue. Under the banking reforms, the country's second-largest and most-troubled bank, Laiki, will be split into two, and crisis-hit Greek branches of Cyprus banks will be sold.

Already struggling with its own bailout programme, Greece has also been suffering from the crisis in Cyprus. There have been questions about the stability of the banking system in Greece, which is due for an inspection early next month by the IMF and the European Union.

"We responded to the need to protect fully depositors of Cypriot banks in Greece and to ensure the stability of the Greek banking system," Piraeus Bank chairman Michalis Sallas said.

Meanwhile, Greek authorities have repeatedly assured the public that Greek bank deposits are safe.

"We are working day and night both to absolutely guarantee the stability of the banking system and to find a lasting solution for Cyprus's economy and its citizens," Greek finance minister Yannis Stournaras said.