Cyprus gears up for banks' reopening

Wednesday 27 March 2013 16.47
Banks in Cyprus getting more security ahead of reopening tomorrow
Banks in Cyprus getting more security ahead of reopening tomorrow

Cyprus has imposed limits on money transfers and hired extra security guards to prepare for the reopening of its banks.

The banks have been shut for almost two weeks to avoid a run during the country's financial drama.

A banking official said today that new controls will include restrictions on large-scale transfers from the country's two largest and most troubled lenders, Bank of Cyprus and Laiki, when they reopen tomorrow.

Both are being restructured and big depositors face losses of as much as 40%.

Authorities are looking to increase the daily withdrawal limit from €100 to €300, while payroll payments will be allowed in order to help businesses, which saw a huge slump as people cut down on their spending amid the uncertainty swirling about the banks.

The restrictions will be kept for at least a week until the situation stabilises, said the official, who spoke only on condition of anonymity because the measures have yet to be officially announced.

Meanwhile, private security firm G4S will dispatch 180 of its staff to all bank branches across the island to keep a lid on 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.

Argyrou said he doesn't foresee any serious trouble unfolding once banks open their doors because people had time to "digest" what has transpired.

Another 120 staff from G4S would be assigned money transportation duties.

Cypriot banks were closed on March 16 as politicians scrambled to come up with a plan to raise €5.8 billion that would qualify the country for €10 billion in bailout loans from fellow euro zone partners and the International Monetary Fund.

Under the deal clinched in Brussels early 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 nonperforming loans and toxic assets going into a "bad bank," officials have said. The healthy side will be absorbed into the Bank of Cyprus.

The board of directors of both banks has been fired and administrators appointed to handle the restructuring and absorption, the banking official said.

Bank of Cyprus CEO Yiannis Kypri issued a statement saying the Central Bank governor had asked him verbally today to resign.

"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," Kypri said.

"I hope that the handling of this transition phase will respect the workers, shareholders and customers of the Bank of Cyprus," he added.

Cypriot officials said the deal would mean the country would shift its focus away from being an international center of financial services. That is expected to cost jobs, adding to the unemployment rate which now stands at around 14%.

Business leaders and cabinet ministers were meeting with President Nicos Anastasiades today to find ways to get the economy going again. To give consumers a break, electricity prices will drop 5.75% next month. Over the next couple of weeks, authorities will look into how they can reduce them by another 3 percent, said Commerce Minister Giorgos Lakkotrypis.

Interior Minister Socrates Hasikos said his ministry is looking to cut red tape in order to attract foreign investment. He said Chinese investors have shown increasing interest in property sales, adding that a single estate agent has sold some 400 residences to Chinese buyers.