Cyprus Banks Open Today With Strict Controls

March 28, 2013

Econintersect:  For the first time since 15 March banks will be open today (28 March 2013) in Cyprus.  There will be tight controls on withdrawals:  €3,000 for foreign travel and €300 per day for domestic uses.  According to the Financial Times this is the first time in the history of the Eurozone that such capital controls have been implemented.  Use of credit cards issued by Cyprus banks will have restrictions overseas but none within the country.  Interbank transfers over €5,000 would need special permission from the central bank.


The controls are specified for seven days but could be extended.  From the Financial Times:

While the capital controls are designed to expire after seven days, people with knowledge of the matter said the government would continue to renew the curbs on a weekly basis for as long as necessary. “Otherwise whatever money is left in the banks will fly out of Cyprus,” said one person close to the central bank.

The Financial Times says there may be legal challenges to the controls that have been implemented because they are viewed as violating EU treaties with provisions prohibiting “arbitrary discrimination or a disguised restriction on the free movement of capital and payments”.

The Wall Street Journal reports that there have been calls for a probe into the movement of large sums of money out of the country in the weeks before the crisis broke.  Some have estimated that several hundred million euros, but less than €1 billion, left the country between March 15 (the last day banks were open) and the end of last week.

The WSJ is also reporting larger losses for depositors than had been mentioned previously.  The latest estimates (speculation?) are that large depositors in the Bank of Cyprus could lose up to 40% of balances and large deposits in the Cyprus Popular Bank (Laiki Bank), which was government owned, could lose up to 80%.  Earlier reports when the settlement was announced early Monday mentioned losses around 30%.  See GEI News.

The New York Times reports that the ECB (European Central Bank) flew €1.5 billion into an airport near Nicosia Wednseday to ensure there was enough cash available through the Cyprus central bank to meet bank needs.


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