Cyprus Sets Up Tight Controls as Banks Prepare to Reopen

NY Times

NICOSIA, Cyprus — The Cypriot government on Wednesday announced severe restrictions on access to funds held in the country’s banks, hoping to control a rush to withdraw money when the banks open Thursday for the first time in nearly two weeks.

The measures, which are supposed to be in effect for only a week but are widely expected to be extended in some form well into the future, will prohibit electronic transfer of funds from Cyprus to other countries. In addition, individuals will not be allowed to take more than 3,000 euros (about $3,860) in cash outside the country, well below the current ceiling of 10,000 euros.

The cap on withdrawals from automated teller machines will rise to 300 euros a day from 100 euros, but credit and debit card charges will be limited to no more than 5,000 euros a person a month. Banks will not cash checks; they will accept checks as deposits, but many people will no doubt be reluctant to put more money into a bank. Bank clients also will not be able to withdraw money from fixed-term deposits before their maturity date.

“This is a typical set of exchange control measures, more reminiscent of Latin America or Africa,” said Bob Lyddon, the managing director of IBOS, an international banking association. “There is no way these will only last seven days. These are permanent controls until the economy recovers.”

To make sure enough cash is on hand, the European Central Bank sent an airplane filled with about 1.5 billion euros in a container to Larnaca airport near Nicosia on Wednesday. The container was loaded onto a truck and escorted by police to the Cypriot central bank for safekeeping, said a person with knowledge of the operation, who requested anonymity because he was not authorized to speak publicly.

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