Cypriot authorities need to focus on rebuilding the bailed-out country’s gutted banking sector and eliminate controls on money flows, a commission of experts has advised.
The four-member Independent Commission on the Future of the Cyprus Banking Sector says the government must leave no doubt that it can live up to the terms of its rescue so as not to fan concerns that the capital controls will stay in place over the long term.
“A clear schedule of steps needs to be laid out to reconstitute [Bank of Cyprus] and the cooperative sector, so that capital controls are lifted and uncertainty removed,” said a summary of the commission’s recommendations that The Associated Press obtained on Wednesday, a day before their official release.
The controls were imposed in March after Cyprus agreed with other eurozone countries and the International Monetary Fund on a rescue plan that forced uninsured depositors to take massive losses on their savings in Bank of Cyprus, the country’s largest, and the now-defunct Laiki.
Bank of Cyprus absorbed parts of the smaller lender.
Cypriot authorities have already put together a “road map” of banking sector milestones that must be achieved before the controls – which include a daily withdrawal limit of 300 euros – are fully phased out.
The government hopes to remove almost all controls by early next year.
The four-person commission says there are “sound reasons” for Cyprus to keep a large banking sector over the longer term, primarily because there are no other sources of finance in the country.