Banks in Cyprus will open today for the first time in more than a week – with tough restrictions to prevent people from draining their accounts.
Cash withdrawals will be limited to €300 per person each day. No cheques will be cashed, although people will be able to deposit them in their accounts, according to a ministerial decree released last night.
The banks will be open for six hours from noon (10am Irish Time) and 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 €5.8bn so the country would qualify for €10bn 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 in the country’s two largest banks, Laiki and Bank of Cyprus.
Since Monday’s deal, 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 on transactions with other countries, provided the customer presents supporting documents. Payments above that amount will need special approval.
Travellers leaving the country will not be able to take with them anything over €1,000 in cash – as well as the equivalent sum in foreign currency.
Tuition fees and living expenses of up to€ 5,000 for three months will be permitted for overseas students, but documentation must be provided proving the student’s relationship to the dispatcher.
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.
Mr Argyrou said he did not foresee any serious trouble unfolding once banks opened 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,” he said.
In Nicosia last night, several hundred demonstrators marched from the European Union’s offices in the capital to parliament to protest at 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 criticised Europe’s handling of the crisis in Cyprus.
Russian millionaire businessman Andrey Dashin said he did not believe his fellow countrymen would rush to pull businesses or money out of the country once banks reopened, despite the fact that many will take a hit from a tax on accounts over €100,000 in both Bank of Cyprus and Laiki.
“There won’t be a substantial Russian run” on Cypriot banks, said Mr Dashin, 37, who runs his currency speculation company ForexTime from the southern coastal resort of Limassol.
“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.”
But he said Russians wanted to a “clear picture” on the kind of capital movement limits imposed so as not to choke off businesses, warning that tight restrictions would be “a sign for businesspeople that their cash is trapped”.
Mr Dashin dismissed reports that Cypriot banks were being used to launder dirty Russian cash as unproven rumours and urged Cyprus to bring in internationally-respected auditors to clear the air.
Under the deal clinched in Brussels on Monday, Cyprus agreed to slash its oversized banking sector and inflict hefty losses on large Laiki and Bank of Cyprus depositors.
Laiki is to be restructured, with its healthy assets going into a “good bank” and its non-performing loans and toxic assets going into a “bad bank”. The healthy side will be absorbed into the Bank of Cyprus.
The board of directors of both banks has been sacked and administrators appointed to handle the restructuring and absorption, a banking official said.
Bank of Cyprus chief executive Yiannis Kypris issued a statement saying the Central Bank governor had asked him to resign yesterday.
“These are very difficult times for everyone. The Bank of Cyprus was and must remain the basic support of the economy and our society in the effort to deal with the crisis our country is going through,” he said.
“I hope that the handling of this transition phase will respect the workers, shareholders and customers of the Bank of Cyprus.”
Meanwhile the country’s foreign minister said his country almost left the eurozone during last week’s bailout talks.
Ioannis Kasoulidis told German daily Frankfurter Allgemeine Zeitung that dropping the common currency was “a possibility which we seriously considered for a while”.