Greek Cyprus says banks to reopen with tight controls

NICOSIA - Agence France-Presse

Protesters cast their shadows on a Greek Cypriot flag during an anti-bailout rally outside the presidential palace in Nicosia March 27. Greek Cypriot banks are set to reopen on March 28. REUTERS photo

Greek Cyprus confirmed that banks would reopen on March 28 after a nearly two-week lockdown, as reports said it would impose unprecedented controls to stop money leaving the bailed-out island.

The central bank said branches that have been shuttered since March 16 -- leaving Cypriot homes and businesses with limited cash -- would be open to "serve the public" from 10:00 a.m. GMT to 04:00 p.m. GMT.

Newspapers said temporary restrictions in place for seven days included bans on taking more than 3,000 euros ($3,900) in cash out of the Mediterranean island and on cashing cheques.

The announcement came as around 1,500 anti-austerity protesters marched on the presidential palace to protest the EU-IMF rescue package which delivers a major hit to big bank depositors and will see thousands left jobless.

Turmoil deepened with the sacking of the chief executive of largest lender Bank of Cyprus by the governor of the central bank, reportedly on the orders of the international lenders behind the deal.

Under a deal agreed in Brussels on March 25, Greek Cyprus is trying to raise 5.8 billion euros to qualify for a 10-billion-euro bailout from the "troika" of the European Union, European Union and International Monetary Fund.

Depositors with more than 100,000 euros in the top two banks face losing a big chunk of their money while Greek Cyprus agreed to major reforms to its crucial banking system, bloated with Russian money and exposed to Greek debt.

The deal kept Greek Cyprus from crashing out of the euro but has caused anger at home.

Earlier this week officials had originally said that all banks would reopen on March, then that Bank of Cyprus and number two lender Laiki would stay closed on Thursday, and finally that all of them would stay shut until then.

"The banks will serve the public tomorrow from 12:00 noon to 06:00 p.m. in the afternoon," central bank spokeswoman Aliki Stylianou told AFP in March 27.

Bank employees union ETYK said staff were ready to go back to work but warned public not take out frustrations on them.

"We are not responsible but on the contrary colleagues are themselves victims of criminal acts and/or omissions that led to this destruction and many are in a very tragic situation," said a union statement.

The finance ministry refused to confirm whether there had been any agreement on capital controls to prevent a run on the banks and stop money leaving the country.

But the websites of the Phileleftheros and Kathimerini newspapers printed a photocopy of what appeared to be a draft of them.

The restrictions put a 3,000-euro ceiling on cash taken abroad by travellers, with customs officials allowed to check at the border, the reports said.

Non-cash payments or money transfers outside Greek Cyprus are prohibited, with some narrowly defined exceptions, and credit card purchases while abroad are limited to to 5,000 euros a month.

GreekCypriots will also be banned from cashing cheques, although they will be allowed to deposit them in their accounts.

Led by the opposition communist Akel party, some 1,500 protesters waved Cyprus and communist flags as they punched their fists in the air and chanted angry slogans against the "troika".

The bailout involves the restructuring of the Bank of Cyprus and the eventual winding down of Laiki, or Popular Bank, the number two bank. The Bank of Cyprus will absorb the "good" parts of Laiki.

That process claimed the job of Bank of Cyprus chief executive Yiannis Kypris on March 27 - just a day after the bank's chairman had his resignation rejected.

Kypris said in a statement that he had been asked verbally to hand in his resignation, adding: "The reason given was the restructuring of the bank under the law approved by parliament and the demand of the troika." Finance Minister Michalis Sarris earlier said Laiki depositors faced losses of up to 80 percent on deposits over 100,000 euros. Bank of Cyprus savers have already been warned they stand to lose 40 percent.

Greek Cyprus is the first eurozone country to impose capital controls or suffer the so-called haircuts after bailouts, unlike Greece, Spain, Portugal and Ireland.