Brussels, 28/03/2013 (Agence Europe) - When the banks opened in Cyprus on Thursday 28 March, there was calm in the streets - the forecast run on the banks simply did not occur after almost two weeks of bank closure while the financial bailout of Cyprus was worked out.
The Cypriot president, Nicos Anastasiades, tweeted his thanks on Thursday to the inhabitants of Cyprus for their maturity and caution. The local media report that banks opened to the public amidst general calm. AFP even reports that some people came to deposit, rather than withdraw, cash. Provisional figures published by the European Central Bank on Thursday say that deposits in euro in Cypriot banks fell by 2.1% (€1 billion) in February compared with January to €46.4 billion, following a 2% decline in January.
The Cypriot finance ministry announced in a press release that most of the Laiki bank, including savings accounts holding up to €100,000, had been transferred to Bank of Cyprus (BoC) as laid down in the deal with the eurozone (see EUROPE 10814). Most the staff have been moved to BoC too. In order to ensure that BoC is robust, it has been totally privatised and has received a 9% recapitalisation, based on the unfavourable macroeconomic scenario set by the PIMCO consultancy. BoC branches re-opened on Thursday.
On Thursday, the European Commission said it had taken “note of temporary restrictions on the free movement of capital, including capital controls, imposed by the Republic of Cyprus as part of a series of measures to prevent the significant risk of uncontrollable outflow of deposits which would lead to the collapse of the credit institutions and to the immediate risk of complete destabilisation of the financial system of Cyprus. Such exception to the principle of the free movement of capital must be interpreted very strictly and be non-discriminatory, suitable, proportionate and applied for the shortest possible period (initially introduced for a week from Thursday 28 March, Ed.). In current circumstances, the stability of financial markets and the banking system in Cyprus constitutes a matter of overriding public interest and public policy justifying the imposition of temporary restrictions on capital movements”.
The range of measures taken by the government include the following restrictions on the movement of capital: each customer will be able to withdraw €300 in cash per day from each bank in which they have an account. Businesses will be able to carry out transactions up to €5,000 per day, per account and pay staff salaries. Payments and or transfers outside the Republic, via debit and or credit and or prepaid cards are permitted up to €5,000 per month, per person from each bank. At Larnaca Airport, there is a notice indicating that each passenger is only allowed to take up to €1,000 out of Cyprus in cash.
IMF. The International Monetary Fund says it would be difficult to extend the solution found for Cyprus to other countries with struggling banks, with an IMF spokesperson saying that Cyprus was a highly complex, one-off case. The spokesperson said the lesson to be learnt from Cyprus was that the eurozone is making rapid progress in the direction of a Banking Union. The head of the Eurogroup, Jeroen Dijsselbloem, said on Monday that the Cypriot solution could become a model of how to solve bank crises, but he later changed his mind (see EUROPE 10815). (EL/transl.fl)