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Cyprus: cash withdrawals capped at 300 euros

Thursday - 3/28/2013, 2:08am  ET

Customers enter a Bank of Cyprus branch as a Piraeus Bank branch is seen in the background in Athens, Wednesday, March 27, 2013. Greece's Piraeus Bank reached an agreement Tuesday to buy the Greek operations of three Cypriot banks for euro 524 million ($678 million). Piraeus Bank said Cypriot bank branches in Greece re-open Wednesday, a day earlier than in Cyprus. (AP Photo/Thanassis Stavrakis)

MENELAOS HADJICOSTIS
Associated Press

NICOSIA, Cyprus (AP) -- 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.

Travelers 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."

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