Angry Cypriots withdraw bank deposits: What’s really going on

Angry Cypriots queued to withdraw money on Thursday as banks reopened for the first time in nearly two weeks under a regime of strict capital controls and with officials bracing for a huge outflow of deposits.
There were short orderly lines at most branches when doors opened at midday (10am GMT) and no signs of panic as depositors waited to access their accounts.

However, many people waiting at banks were furious about the crisis that has crippled the island’s financial sector and forced many businesses to close.

At Co-op bank, Magda El Moursi, a student, had come to help her grandmother take out the maximum €300 from her pension. “People are very angry and upset with the president and the government. We are paying for their mistakes,” she said.

Angelos Stylanos, a manager at a Laiki bank branch, said he had been worried about going to work on Thursday. “I didn’t expect people to be so calm – even people who lost money.” After all, he added, “We are the bank – I am the bank.”

While calm Mr Stylanos said his sympathies lay with his customers. “We feel angry, betrayed.”

“Anyway Luxembourg, Slovenia is coming,” he added sarcastically – referring to other offshore centres’ attempts to woo money from Cyprus. “We should give them seminars on risk issues.”

Kyriacos Hadjisophokis, a pensioner and veteran of the 1974 war between Greece and Turkey, was one of the few people waiting outside Nicosia’s flagship Bank of Cyprus branch, two hours before it was due to reopen. “I need to get money to pay rent, and to eat,” he said, explaining that he did not own a bank card. “It has been hard for two weeks.”

Residents of Cyprus will only be able to withdraw a maximum of €300 in cash per day from each bank where they hold an account and local businesses will have to limit transactions to a maximum of €5,000 a day.

Credit card transactions will be limited to €5,000 a month, while Cypriot customs officials will ensure that travellers take just €1,000 in bank notes out of the country per trip.

In the well-heeled south of Nicosia, a crowd of about 30 people were pressed up against the revolving door outside Laiki Bank, where they were let in a few at a time by guards.

The Bank of Cyprus next door was nearly empty, with most people just taking advantage of the raised limit for withdrawals from the cash machine, but at Laiki Bank people had many more questions about where there money was to withdraw it.

“I need to get about €20,000 from the bank to pay my suppliers in China,” said businessman Michael Andreou in the crowd outside the bank, adding that he also needed extra cash to pay his employees. “There are crates of children’s toys in China just waiting to be shipped to us when the money goes.”

He added: “I don’t know exactly where the money is between the two banks, so I need to find out inside.”

But the lack of chaos reassured global equity markets, which had fallen before the banks reopened. The FTSE All-World equity index clawed back earlier declines and was up 0.1 per cent as trading opened in New York. The euro was up 0.2 per cent at $1.2809. However, the Cyprus stock market remained closed.

Meanwhile, data from the Central Bank of Cyprus published on Thursday showed that savers from other eurozone countries withdrew 18 per cent of the cash they held in Cyprus, or €860m, in February but that deposits from non-eurozone countries rose fractionally to €42.6bn. Overall, deposits were down almost €1bn to €67.5bn.

The finance ministry defended the use of capital controls, describing them as necessary to stop a run on the banks and insisting they would be “temporary”.

“The Central Bank of Cyprus and the government of Cyprus will review them each day, with a view to progressive lifting of the measures as soon as circumstances allow,” the ministry said on Thursday.
The European Commission threw its support behind the measures for the first time arguing on Thursday that they did not violate EU legislation. Some experts had previously argued that they did.

“In current circumstances, the stability of financial markets and the banking system in Cyprus constitutes a matter of overriding public interest and public policy justifying the imposition of temporary restrictions on capital movements,” the commission said.

Officials will be keeping a close eye on the Bank of Cyprus and Laiki Bank – the island’s two largest lenders whose big depositors will face large losses as part of a €10bn EU bailout.

Laiki Bank branches are due to operate on Thursday even though the lender has been put into administration. All assets will be transferred to the Bank of Cyprus.

The Bank of Cyprus and Laiki’s biggest depositors will receive shares in the new Bank of Cyprus in exchange for significant losses on their deposits, meaning as of Thursday the lender will in effect be in private hands.

The chairman and chief executive of the Bank of Cyprus have already been fired. Control of the institution will be handed over to a special administrator.

The finance minister said Laiki customers would be able to access their accounts at all branches on Thursday and also that they could continue to use their Laiki credit and debit cards.

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