News Column

Last of domestic cap controls lifted

May 30, 2014



By George Psyllides

The government on Friday abolished the last of the domestic capital controls, introduced last year to prevent a bank run after agreeing to a bailout that shut down a major lender, and imposed losses on large deposits in a second.

The remaining restriction was the opening of bank accounts.

"The fourth consecutive positive assessment of the progress of the economic program for Cyprus ??by the troika (lenders), the upgrading of the credit rating of Cyprus by rating agencies and the apparent stabilisation of deposits in the banking system add to the positive developments, and allow for the abolition of all domestic restrictive measures on transactions," the finance ministry said in a statement.

Cyprus introduced harsh capital controls in March 2013 to prevent a run on banks after a bailout shut down Laiki Bank and imposed losses on large deposits in Bank of Cyprus in a 'bail-in' that was conditional for a €10bn rescue package from the EU and the International Monetary Fund.

Restrictions on foreign banks were also eased.

Opening an account for indirect credit facilities – letters of credit an d letters of guarantee – was allowed.

If the account is opened to service a loan, then its credit balance must not at any time exceed 120 per cent of the loan balance, the ministry said.

In case the bank only provided an indirect credit facility, the account balance must not at any time exceed 120 per cent of the balance of the facility.

 

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Source: Cyprus Mail


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