Cyprus banks to reopen on March 26 with temporary limits to be placed on financial transactions

Cyprus banks are to reopen on Tuesday, March 26, although the two at the centre of the crisis, Bank of Cyprus and Laiki, will remain shut until Thursday, March 28.

President Nicos Anastasiades has said temporary limits will be placed on financial transactions after a bailout deal imposing a tax on bank deposits.

He said “very temporary restrictions” would be put on capital flows, but gave no details.

Controls to prevent money leaving the country are already in place.

Certain limits on the size of cash withdrawals are expected to continue.

The banks’ reopening came after Cyprus agreed a deal with the IMF and the EU that releases 10 billion euros in support.

It was conditional on Cyprus itself raising billions of euros, which it will do by way of a tax on deposits of more than 100,000 euros.

The banks shut a week ago after the country’s first money-raising solution, which would have hit smaller deposit holders as well as larger holdings, was rejected.

On Monday morning, hopes that the deal would solve the crisis lifted shares.

But later, stock markets were rocked after Jeroen Dijsselbloem, head of the Eurogroup of eurozone finance ministers, suggested that the deal for Cyprus model could form a template in any future bailout.

Jeroen Dijsselbloem, the Dutch finance minister who as head of the Eurogroup played a key role in the Cyprus negotiations, said the deal represented a new template for resolving future eurozone banking problems.

“If there is a risk in a bank our first question should be <<OK, what are you in the bank going to do about that?>>,” he told Reuters and the Financial Times.

Jeroen Dijsselbloem later added a clarification, saying that Cyprus was “a specific case with exceptional challenges”.

He said the pattern for bank rescues should see shareholders take the first hit, then bondholders, who lend money through financial markets, and only then should depositors with large bank balances be tapped.

The Cyprus deal puts the burden for dealing with problem banks on their shareholders and creditors – in this particular case, customers with large bank balances – rather than the government and taxpayers, or bondholders, who lend through financial markets.