News Column

Cyprus Banks Reopen With Tough Restrictions in Place

March 28, 2013
Central Bank of Cyprus. (Photo: TourinNicosia, Creative Commons)
Central Bank of Cyprus. (Photo: TourinNicosia, Creative Commons)

Banks in Cyprus reopened on Thursday with tough capital restrictions in place after being closed for nearly two weeks while negotiators sought to reach a deal on an international bailout.

Customers were queuing calmly outside bank branches in Nicosia where police and private security guards were deployed to maintain order.

"We ask for your patience. We will do our best and everything we can to facilitate the transactions," Dimitris Antoniou, Bank of Cyprus branch manager in central Nicosia told a line of some 60 poeple before opening the doors.

"We only need your cooperation and understanding because we will be here all day," he added, as security guards and dozens of journalists looked on.

Meanwhile, branches of Cyprus' troubled second largest lender, Laiki Bank, did not open on time due to a delay in the bank's computer system.

Severe new restrictions on bank transactions have been imposed, including a daily withdrawal limit of 300 euros per person per day and limiting payments abroad to 5,000 euros.

Other capital controls include limiting credit card payments to 5,000 euros per month and no checks will be cashed, although they can be deposited.

Cypriots will not be allowed to travel abroad with more than 1,000 euros in cash, while no fixed-term deposits can be terminated prematurely. Students studying abroad will be allowed to draw a maximum of 5,000 euros every three months for living expenses.

Andreas Adamidis, a 68-year-old pensioner, arrived at Laiki Bank several hours ahead of its scheduled noon opening.

"I never asked for a debit card to be issued to me so the past several weeks my family has been living off food given to us by neighbors," he said.

While calm was largely reported across the island, many customers could not withhold their rage.

"I hope that the European Union is happy that they have destroyed Cyprus," said Petros Stylianidis, adding that he came to the Bank of Cyprus to cash several cheques, many of which were not accepted.

Another woman, 22-year-old cashier Maria Nikolaou, said she just wanted to withdraw enough money to last her until the end of the week.

"My debit card was eaten by the ATM machine so until I get a new one issued I have come here today just to get out a few hundred euros," she said.

Cyprus' finance ministry said restrictions will be reviewed daily and would be in place at least until next Wednesday.

The European Commission said in a statement that the controls were justified to ensure the stability of Cyprus' financial system.

There is a "significant risk of uncontrollable outflow of deposits which would lead to the collapse of the credit institutions and to the immediate risk of complete destabilization of the financial system of Cyprus," it added.

But the free movement of capital "should be reinstated as soon as possible" and the commission will monitor the restrictions in Cyprus to make sure they remain "strictly proportionate," it said.

Nicosia is the first government in the eurozone to impose capital controls, in an effort to prevent a collapse of the island's financial system.

Cyprus avoided a financial meltdown early this week by sealing a 10-billion-euro (13-billion-dollar) bailout from international lenders.

The deal agreed by eurozone finance ministers would shrink the banking system and force large losses on depositors at the country's two largest lenders, Bank of Cyprus and Laiki.

Depositors with more than 100,000 euros could face losses of up to 30-40 per cent. Smaller deposits will be guaranteed.

Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH

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