Cyprus’s banks are preparing to open their doors today for the first time in almost two weeks, with new rules curbing access to the cash some customers have been struggling to find for food and bills.
The Central Bank of Cyprus’s capital controls will include a 300-euro ($383) daily limit on withdrawals and restrictions on transfers to accounts outside the country. Banks will open at midday and close at 6 p.m. local time, Yiangos Dimitriou, head of the central bank’s audit department, said yesterday in comments broadcast on state-run CyBC television.
“I only bought a few small items during these days to survive,” said pensioner Kyriakos Hadjisophocleos, 65, waiting on a bench in front of a Bank of Cyprus branch in Nicosia since 7:30 a.m. to get money to pay part of his 380-euro rent. “I had many coins saved up so I was using them. If the banks didn’t open today I would have had to borrow from some friends.”
Cyprus’s lenders have been closed since March 16, when the European Union presented a proposal to force losses on all depositors in exchange for a 10 billion-euro bailout. That plan touched off protests and political upheaval on the island, and was rejected by the country’s parliament. A subsequent agreement shuts Cyprus Popular Bank Pcl (CPB), the second-largest lender, and imposes larger losses on uninsured depositors.
The controls will be in force for seven days, according to a statement from the Finance Ministry. Dimitriou had said they would be in effect for four days. Security guards at banks in Nicosia said they had been instructed to allow only eight customers in at any one time today.
“Please, let’s all be calm and be careful not to create more problems,” Dimitriou said. “It will serve no purpose for us to run to banks and try to find ways to get money.”
The European Commission said in a statement today the control on capital movements must remain “proportionate” and be lifted as soon as possible.
The Cyprus Parliament last week gave wide-ranging powers to the central bank governor, Panicos Demetriades, and Finance Minister Michael Sarris, who have spent the last days deciding which measures to implement.
Those chosen include bans on terminating time deposits and cashing checks. Customers can transfer at most 5,000 euros per month from a given financial institution.
“I will not go to the bank today because I’m afraid that it will be chaos,” said Maria Charalambous, a grocery store owner. “You do not know who will be behind you in the line and you could end up getting robbed. I will wait and see.”
The restrictions aim to protect the country’s financial industry, while trying to uphold the principle of free movement of capital within the EU, Aliki Stylianou, a central bank spokeswoman, said yesterday before the measures were announced.
Cyprus in June became the fifth euro-area nation to request a rescue, after Greece’s debt restructuring trashed the financial health of lenders including Bank of Cyprus Plc (BOC), the nation’s biggest lender, and Cyprus Popular.
The 18 billion-euro economy is the third-smallest in the 17-nation euro area. Before the bailout, which was coupled with an austerity package, the European Commission predicted a contraction of 3.5 percent in 2013. Economists said afterward that the damage will be greater.
Moody’s Investors Service yesterday lowered the highest rating that can be assigned to a domestic debt issuer in Cyprus to Caa2, citing a growing risk that the country would exit the euro. The company said Cyprus’s Caa3 government bond rating and negative outlook remain unchanged.
Listed Greek companies reported the amounts of the deposits they held in Cypriot banks at the request of the Hellenic Capital Markets Commission. Jumbo SA (BELA), Greece’s biggest toy retailer, said it holds about 58 million euros at Bank of Cyprus and predicted sales in Cyprus would drop as much as 25 percent by the end of the current fiscal year.
The Athens Stock Exchange index dropped 4 percent to 850 yesterday and has lost 12 percent since the March 16 proposal. The Cyprus Stock Exchange has been shut throughout the period.
Deposits at Alpha Bank SA’s Cypriot unit stood at 2.7 billion euros at the end of 2012, Chief Financial Officer Vassilios Psaltis said yesterday. Alpha, Greece’s third-largest lender and the one with the biggest presence in Cyprus, reported a 1.1 billion-euro loss for the year.