Protests as banks remain closed

Thousands of students and bank workers protested in Nicosia yesterday as banks stayed shut to stop a run on deposits after the island agreed a painful bailout to avert bankruptcy.

The chairman of Cyprus’s biggest commercial bank offered to resign after a special administrator was appointed over his head to run the lender, which is being restructured as part of the package to bail out the oversized financial sector.

Cyprus’s banks were ordered to remain closed until tomorrow, and even then will impose capital controls to prevent depositors from stripping out all their funds.

Cyprus’s central bank governor, Panicos Demetriades, said “superhuman efforts are being made” to open banks tomorrow.

“Temporary” restrictions will be imposed on financial transactions once the banks do, he said, but would not specify what they would be or how long they would be in place for. “We have to restore the public’s trust in banks,” he said.

Finance Minister Michalis Sarris said the restrictions would help stem any mass deposit withdrawal that is “bound to happen” and that they would be removed in a “relatively short period of time. “I think every day [banks] are not open 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.”

Up to 3,000 students protested outside parliament, the first major expression of popular anger after Cyprus agreed the €10bn bailout with the EU.

“They’ve just gotten rid of all our dreams, everything we’ve worked for, everything we’ve achieved up until now, what our parents have achieved,” said one student.

Outside the central bank, about 200 employees of the country’s biggest commercial bank, the Bank of Cyprus, demanded the resignation of the central bank governor, chanting “hands off Cyprus” and “disgrace”.

“We are scared. We were also so proud of the Bank of Cyprus. We worked with a lot of love, not just for the money,” said a Bank of Cyprus worker.

The chairman of the bank, Andreas Artemis offered to resign yesterday, a source said.

However, last night, the bank rejected the resignations of Mr Artemis and four other directors. In a statement, Bank of Cyprus said the resignations had not been accepted and “will only apply if not withdrawn within one week”.

Dinos Christofides, an accountant and banker, revealed he had been named administrator to run the Bank of Cyprus: “It means that from now until further notice I will be running the bank. It could be short term… or it could be longer.”

After returning from last-ditch negotiations in Brussels, Cypriot president Nicos Anastasiades said late on Monday that the rescue plan agreed with international lenders was “painful” but essential.

He agreed to close down the second-largest bank, Cyprus Popular, and inflict heavy losses on big depositors, many of them Russian, after Cyprus’s financial sector ran into trouble when its investments in neighbouring Greece went sour.

European leaders said a chaotic national bankruptcy that might have forced Cyprus from the euro and upset Europe’s economy was averted. Investors in other European banks are alarmed by the precedent of making depositors bear losses.

“The agreement we reached is difficult but, under the circumstances, the best that we could achieve,” Mr Anastasiades said in a televised address.