Cash withdrawals at Cyprus banks to be capped at 300 euros
Menelaos Hadjicostis, The Associated Press
Published Wednesday, March 27, 2013 7:41AM EDT
Last Updated Wednesday, March 27, 2013 4:57PM EDT
NICOSIA, Cyprus -- Banks in Cyprus are to open for the first time in more than a week on Thursday, operating for six hours from noon (10:00 GMT), but restrictions will be in place on financial transactions to prevent people from draining their accounts.
Among the capital controls, cash withdrawals will be limited to 300 euros ($383) per person each day. No checks will be cashed, although people will be able to deposit them in their accounts, according to a ministerial decree that was released late Thursday.
The controls will be in place for four days.
Cyprus's banks were closed on March 16 as politicians scrambled to come up with a plan to raise 5.8 billion euros ($7.5 billion) so the country would qualify for 10 billion euros ($12.9 billion) in much-need bailout loans for its collapsed banking sector. The deal was finally reached in Brussels early Monday, and imposes severe losses on deposits of over 100,000 euros in the country's two largest banks, Laiki and Bank of Cyprus.
Since Monday's deal, Cypriot authorities have been rushing to introduce measures to prevent a rush of euros out of the country's banks when they do reopen.
Other capital controls include a cap of 5,000 euros on transactions with other countries, provided the customer presents supporting documents. Payments above that amount will need special approval.
Travellers leaving the country won't be able to take with them anything over 1,000 euros in cash -- as well as the equivalent sum in foreign currency.
Tuition fees and living expenses of up to 5,000 euros for three months will be permitted for overseas students, but documentation must be provided proving the student's relationship to the dispatcher.
Also investors will also not be able to terminate fixed-term deposit accounts before they mature unless the funds are to be used for the repayment of a loan in the same bank, the decree says.
In the capital, Nicosia, armed police officers guarded several trucks carrying containers arriving at the country's Central Bank, while a helicopter hovered overhead.
The contents of the trucks could not be independently confirmed, although state-run television said they were carrying cash flown in from Frankfurt for the bank reopening.
Meanwhile, private security firm G4S will dispatch 180 of its staff to all bank branches across the island to keep a lid on any possible trouble, said John Argyrou, managing director of the firm's Cypriot arm.
"Our presence there will be for the comfort of both bank staff and clients, but police will also be present," he said.
Argyrou said he doesn't foresee any serious trouble unfolding once banks open their doors because people had time to "digest" what has transpired.
"There may be some isolated incidents, but it's in our culture to be civil and patient, so I don't expect anything serious."
Another 120 staff from G4S would be assigned money transportation duties.
In Nicosia Wednesday night, several hundred demonstrators marched from the European Union's offices in the capital to Parliament to protest the bailout plan.
Before its collapse, Cyprus's banking sector grew to nearly eight times the size of the country's economy, mainly on the back of substantial deposits from Russia. This sparked accusations that the country was being used by Russian criminals to launder their money. Over the past week, the government in Moscow has criticized Europe's handling of the crisis in Cyprus.
Russian millionaire businessman Andrey Dashin told the Associated Press in an interview that he doesn't believe his fellow countrymen would rush to pull businesses or money out of the country once banks reopen, despite the fact that many will take a hit from a tax on accounts over 100,000 euros in both Bank of Cyprus and Laiki.
"There won't be a substantial Russian run" on Cypriot banks, said Dashin, 37, who runs his currency speculation company ForexTime from a brand-new high-rise in the southern coastal resort of Limassol. Dashin doesn't stand to lose on his deposits which aren't in either of the top two Cypriot banks.
"Russians are much more accustomed to such circumstances, we've had so many crisis in Russia...I don't have the feeling that (Russians) are ready to pull out their business or money out of their country," Dashin said.
But he said Russians want to have a "clear picture" on the kind of capital movement limits that will be imposed so as not to choke off businesses, warning that tight restrictions would be "a sign for businesspeople that their cash is trapped."
Dashin dismissed reports that Cypriot banks were being used to launder dirty Russian cash as unproven rumours and urged Cyprus to bring in internationally respected auditors to clear the air.
Under the deal clinched in Brussels early Monday, Cyprus agreed to slash its oversized banking sector and inflict hefty losses on large Laiki and Bank of Cyprus depositors.
Laiki is to be restructured, with its healthy assets going into a "good bank" and its nonperforming loans and toxic assets going into a "bad bank," officials have said. The healthy side will be absorbed into the Bank of Cyprus.
The board of directors of both banks has been fired and administrators appointed to handle the restructuring and absorption, the banking official said.
Bank of Cyprus CEO Yiannis Kypris issued a statement saying the Central Bank governor had asked him verbally Wednesday to resign.
"These are very difficult times for everyone. The Bank of Cyprus was and must remain the basic support of the economy and our society in the effort to deal with the crisis our country is going through," Kypris said. "I hope that the handling of this transition phase will respect the workers, shareholders and customers of the Bank of Cyprus."
Cypriot officials said the deal would mean the country would shift its focus away from being an international centre of financial services. That is expected to cost jobs, adding to the unemployment rate which now stands at around 14 per cent.
The country's foreign minister said his country almost left the eurozone during last week's bailout talks.
Ioannis Kasoulidis told German daily Frankfurter Allgemeine Zeitung in an interview to be published Thursday that dropping the common currency was "a possibility which we seriously considered for a while."