Cyprus: banks open but no free access to money

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Cyprus: banks open but no free access to money

Cyprus: banks open but no free access to money
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People living in Cyprus are again able to use banks on the island for the first time in two weeks as they finally reopened today.

Branches are open between 12-6pm local time (11am-5pm CET).

The Cyprus Stock Exchange will remain closed.

This morning, armoured trucks delivered cash to banks that have been shut since March 15.

However, are still be limits on what customers can do. Only cash withdrawals of 300 euros a day are allowed. Transfers to banks outside Cyprus are restricted to 5,000 euros a month. Anyone leaving the island will not be able to take more than 1,000 euros in cash.

The use of these restrictions will be assessed daily, according to the head of internal audit at Cyprus’ Central Bank, Yiangos Demetriou.

All these measures are to stop money flooding out of the banking system after Cyprus agreed to a 10-billion euro bailout with strict conditions, including a levy on bank accounts containing more than 100,000 euros.

The haircut is aimed at raising 5.8 billion euros from savers.

After negotiations in Moscow failed to produce any results, Nicosia was forced to agree to the 10-billion euro bailout from the International Monetary Fund, the European Central Bank and the EU – known together as the troika. The deal was initially rejected by the Cypriot parliament.

One of the conditions of the bailout is the closure of the second largest bank in Cyprus, Laiki, as known as the Popular Bank. Customers with less than 100,000 euros in an account will be transferred to the island’s largest bank, Bank of Cyprus.

It remains to be seen what kind off effect this bailout and the conditions will have on the Mediterranean island with a financial sector eight times the size of its 17 billion euro economy.

The Cyprus bank bailout

  • The bailout will mean a significant restructuring of Cyprus’ banking sector

  • The country’s second largest bank, Laiki bank, will be split into two parts, a “bad bank” and “good bank”, before being closed, incurring thousands of job losses

  • Deposits in Laiki bank of less than 100,000 euros (effectively the “good bank”) are insured by EU law and will be transferred to the country’s biggest bank, Bank of Cyprus

  • Deposits in Laiki bank of more than 100,000 euros are not insured by EU law and will be put into the “bad bank”

  • Deposits in this “bad bank” and deposits of more than 100,000 euros in Bank of Cyprus will be frozen and used to pay Laiki’s debts and recapitalize Bank of Cyprus. These uninsured depositors will have to face forced losses of up to 40% on their deposits