Cyprus sets up tight controls as banks prepare to reopen
Baku, March 28 (AZERTAC). The measures, which are supposed to be in effect for only a week but are widely expected to be extended in some form well into the future, will prohibit electronic transfer of funds from Cyprus to other countries. In addition, individuals will not be allowed to take more than 3,000 euros (about $3,860) in cash outside the country, well below the current ceiling of 10,000 euros. The cap on withdrawals from automated teller machines will rise to 300 euros a day from 100 euros, but credit and debit card charges will be limited to no more than 5,000 euros a person a month. Banks will not cash checks; they will accept checks as deposits, but many people will no doubt be reluctant to put more money into a bank. Bank clients also will not be able to withdraw money from fixed-term deposits before their maturity date.
“This is a typical set of exchange control measures, more reminiscent of Latin America or Africa,” said Bob Lyddon, the managing director of IBOS, an international banking association. “There is no way these will only last seven days. These are permanent controls until the economy recovers.” To make sure enough cash is on hand, the European Central Bank sent an airplane filled with about 1.5 billion euros in a container to Larnaca airport near Nicosia on Wednesday. The container was loaded onto a truck and escorted by police to the Cypriot central bank for safekeeping, said a person with knowledge of the operation, who requested anonymity because he was not authorized to speak publicly. The person said the European Central Bank had indicated it would continue flying cash to the country as needed. The Cypriot finance minister, Michalis Sarris, said Wednesday that a flood of withdrawals was bound to happen quickly anyway, but that the restrictions would at least help stem a mass flight of deposits. “Each day that banks remain closed creates more uncertainty and more difficulties for people, so we would like to do our utmost to make sure that this new goal that we have set will work,” Mr. Sarris said. Despite those strictures, the Cypriot authorities are bracing for as much as 10 percent of the 64 billion euros on deposit in the country’s banks to be pulled out on Thursday. Experts predict a much bigger bank run whenever the controls are eventually lifted or eased further. As part of the effort to clean up the situation, the chief executive of the Bank of Cyprus, the nation’s largest bank, was fired Wednesday by the central bank, along with the bank’s entire board. He will be replaced by an administrator overseeing the bank’s consolidation. That move came in consultation with the so-called troika of international lenders — the European Commission, the European Central Bank and the International Monetary Fund — that are completing the terms of a 10 billion euro bailout for Cyprus to help it absorb the blow from the collapse of its outsize banking system.
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