Cyprus imposes limits on cash taken abroad

AFP and Reuters

NICOSIA — Cyprus’s central bank imposed capital controls on Wednesday to prevent funds fleeing abroad, limiting what travellers may take out, restricting credit card purchases and slapping a ban on cashing cheques, local media reported. Under a decree issued initially valid for seven days, individuals will be prohibited from taking more than 3,000 euros (US$3,840) in cash on each trip abroad and limited to 5,000 euros a month in credit or debit card purchases while out of the country, Phileleftheros and Katherimini newspapers reported. At the same time, companies will have to provide supporting documentation for all imports of more than 500 euros. The main opposition party was also due to hold a major rally, following protests by thousands of bank workers and students on Tuesday against the 10-billion-euro (US$13 billion) EU-IMF rescue package. Finance Minister Michalis Sarris told the Financial Times newspaper that the capital controls will be imposed for a seven-day period and then reevaluated, and that they will be “very differentiated” according to various banks. “We are trying to figure out a sensible set of measures that is flexible enough to allow the functioning of the economy,” Sarris told the FT in an interview published Wednesday.

Up to 80% Losses on Deposits in Laiki: Finance Minister In a separate interview with state television Sarris warned that uninsured savers at the country’s second biggest bank, Laiki or Popular bank, faced losses of up to 80 percent on deposits over 100,000 euros. “Realistically, very little will be returned,” he said. “The amount (returned) could be 20 percent. Certainly, for depositors above 100,000 euros it could be a very significant blow.” Savers in Bank of Cyprus, the island’s biggest bank, have already been warned they stand to lose 40 percent of their savings over 100,000 euros. The bailout deal struck in Brussels on Monday involves tough reforms to the bloated Cypriot banking system, with Bank of Cyprus absorbing the salvageable parts of Laiki, which will be wound up. On Tuesday central bank governor Panicos Demetriades said the delay in reopening the banks was to ensure good capital controls but also so strengthen the Bank of Cyprus.