Cyprus government has decided to lift the last remaining capital controls it imposed on the country’s banking system during the financial crisis of 2013.
Cyprus was the only crisis-hit eurozone country to restrict capital transfers, as it faced a run on the banks.
The controls were eased in January.
There will no longer be a monthly cap of €20,000 ($22,000) on transfers by individuals to foreign banks, or of €10,000 for travelers moving money out of the country.
Cyprus received a €10 billionn bailout from the EU and International Monetary Fund (IMF) after its biggest banks nearly collapsed in March 2013 because of huge losses on their Greek investments.
The island’s second-biggest lender, Cyprus Popular Bank (also known as Laiki Bank), was wound up and deposits worth more than €100,000 in the largest bank, Bank of Cyprus, were seized.
Those measures were part of the deal to ensure that Cyprus funded part of the €10 billion bailout.
Speaking on April 3, Cyprus President Nicos Anastasiades voiced confidence that the country was recovering well, despite three years of recession
Lifting capital controls, Nicos Anastasiades said, was “a vote of confidence in our banking system which, now fully independent of Greek banking institutions, can move forward”.
The Greek debt crisis had a severe impact on Cypriot banks, which lost about €4.5 billion worth of Greek sovereign bonds – equivalent to 25% of Cypriot gross domestic product, Reuters news agency reports.
Cyprus parliament has voted to restructure the island’s banks, set up a “national solidarity fund”, and establish capital controls to prevent a bank run.
Efforts continue to reach consensus on other key issues such as levies on bank deposits.
Cypriot President Nicos Anastasiades is to hold talks in Brussels with the EU before Cyprus’s parliament reconvenes.
Cyprus needs to raise 5.8 billion euros ($7.5 billion) to qualify for a 10 billion-euro bailout.
On Friday, the Cypriot parliament passed a total of nine bills, covering three main elements of the rescue plan including:
- Restructuring of the banking sector, starting with the most troubled bank of all – Laiki (Popular) Bank, the country’s second largest
- The creation of a solidarity fund: nationalizing pension funds and other state assets
- The approval of capital controls to prevent large fund withdrawals out of Cyprus
Cyprus parliament has voted to restructure the island’s banks
The bank levy issue may come before parliament later in the weekend. A levy, possibly of around 15%, on all deposits over 100,000 euros, has been suggested.
The “solidarity fund” would allow the pooling of state assets for an emergency bond issue, reports the Reuters news agency.
These include future gas revenues and some pension funds – an idea that German Chancellor Angela Merkel has strongly condemned.
Under the bank restructuring, Cyprus’ troubled lenders will be split into so-called good and bad banks.
Before the series of much-delayed votes in an emergency session of parliament, the European Union, Germany and leading bankers all urged MPs to speedily pass the reforms.
Eurozone finance ministers have called a meeting on Sunday to discuss the Cyprus crisis.
The European Central Bank has given Cyprus until Monday to raise the bailout money, or it says it will cut off funds to the banks, meaning they would collapse, possibly pushing the country out of the eurozone.
The EU has postponed next week’s summit to discuss free trade with Japan, so European leaders can concentrate on trying to solve the Cyprus crisis.
Cyprus banks have been closed since Monday and many businesses are only taking payment in cash.
[youtube LAAYVG7aHu4]
Cyprus parliament has approved a “national solidarity fund” to ease the banking crisis, which has hit confidence across the eurozone.
MPs also imposed capital controls to prevent a run on the island’s troubled banks.
These are the first of a series of laws intended to raise the 5.8 billion euros ($7.5 billion) Cyprus needs to qualify for a 10 billion-euro bailout.
MPs are still to decide whether to impose a levy on large bank deposits.
The fund would allow the pooling of state assets for an emergency bond issue, reports the Reuters news agency.
Parliament on Tuesday rejected a levy on all deposits to raise the money.
Before the series of much-delayed votes in an emergency session of parliament, the European Union, Germany and leading bankers all urged MPs to speedily pass the reforms.
Cyprus parliament has approved a “national solidarity fund” to ease the banking crisis
The European Central Bank has given Cyprus until Monday to find a solution, or it says it will stop transferring money to its undercapitalized banks.
The EU has postponed next week’s summit to discuss free trade with Japan, so European leaders can concentrate on trying to solve the Cyprus crisis.
Banks on the island have been closed since Monday and many businesses are only taking payment in cash.
There were protests outside parliament on Friday.
Before the parliamentary session began, government spokesman Christos Stylianides said the authorities were engaged in “hard negotiations with the troika”, referring to the EU, the European Central Bank and the International Monetary Fund, the AFP news agency reports.
German Chancellor Angela Merkel warned Cyprus not to “exhaust the patience of its eurozone partners”, reports say.
