A plane carrying one million euro (£852,600) has arrived in Cyprus as part of a "contingency measure" to help troops and their families.
The Ministry of Defence (MoD) said the RAF flight will provide people with emergency loans in the event that cash machines and debit cards stop working completely. The MoD stressed it was determined to minimise the impact of the Cyprus banking crisis on "our people" and it will consider further shipments if required.
The aircraft, which landed at 7.50pm UK time, arrived just hours after the Cypriot parliament rejected a critical draft Bill that would have seized part of people's bank deposits. Cyprus will now have to come up with an alternative plan to raise the money to qualify for a vital international bailout or the country could go bankrupt.
The Government had re-assured British troops posted to Cyprus that they will be fully compensated for any plans to raid their savings.
As well as sending out the emergency fund, the MoD asked personnel if they would prefer this and future months' salaries to be paid into UK bank accounts.
It said in a statement: "An RAF flight left for Cyprus this afternoon with one million euro on board as a contingency measure to provide military personnel and their families with emergency loans in the event that cash machines and debit cards stop working completely. We will keep this under review and consider further shipments if required.
"The MoD is proactively approaching personnel to ask if they want their March, and future months' salaries paid into UK bank accounts, rather than Cypriot accounts. We're determined to do everything we can to minimise the impact of the Cyprus banking crisis on our people."
The position of more than 3,000 British service personnel was thrown into doubt on Monday when Treasury Minister Greg Clark only went as far as saying that they would not suffer "unreasonable losses" as a result of the planned levy. However, George Osborne told Cabinet that UK Armed Forces personnel and civil servants posted to Cyprus will be "compensated in full" for any losses as a result of the planned levy on savings. The Chancellor's comments confirmed a pledge he made on Sunday that "people who are doing their duty for our country in Cyprus will be protected from this Cypriot bank tax".
Nicholas Papadopoulos, the chairman of the Cypriot parliamentary finance committee, said banks would remain closed "for as long as we need to conclude an agreement", but stressed this would be "in the next few days". Banks had been ordered to remain shut until Thursday while the Bill was debated and amended, to prevent a bank run.
Under the original deal reached in Brussels late on Friday, to qualify for the 10 billion euro (£8.5 billion) bailout from other eurozone countries and the International Monetary Fund, Cyprus had to raise 5.8 billion euro (£5 billion) in additional funds by taxing all bank accounts. After prompting an outcry from depositors, Cypriot politicians amended the Bill earlier today to exempt small depositors with up to 20,000 euro (£17,000) in the bank.