Cyprus banks to re-open; limits on transactions

NICOSIA, Cyprus (AP) ? Cypriots get their first chance to access their savings in almost two weeks when the country's banks reopen Thursday ? albeit with strict restrictions on transactions ? after being closed due to the country's acute financial crisis.

Lines were starting to form outside banks Thursday morning ahead of the official opening for six hours at noon (1000 GMT). Systems have been frozen pending the official opening, and guards from a private security firm were reinforcing police outside some ATMs and banks in the capital, Nicosia.

Controls on financial transactions, imposed to prevent worried savers and businesses rushing to withdraw all their money, include limiting cash withdrawals to 300 euros ($383) per day per person and limiting payments abroad to 5,000 euros. No checks can be cashed, although they can be deposited in bank accounts, and travelers leaving the country can only take up to 1,000 euros, or the equivalent in foreign currency, with them in cash.

The restrictions will be reviewed daily and are initially in place for seven calendar days, until next Wednesday, the decision published by the Finance Ministry states.

Banks in Cyprus have been shut since March 16 to prevent people draining their accounts as politicians scrambled to come up with a plan to raise enough funds for Cyprus to qualify for 10 billion euros ($12.9 billion) in bailout loans for its stricken banking sector. An initial plan that would have seized up to 10 percent of people's bank deposits was soundly rejected in Parliament, leaving politicians struggling to come up with an alternative.

The deal was finally reached in Brussels early Monday, and imposes severe losses on deposits of over 100,000 euros in the country's two largest banks, Laiki and Bank of Cyprus. Laiki will be broken up, with its good assets being absorbed by Bank of Cyprus. The exact amounts of the losses have not yet been officially announced. Nonetheless, customers of those banks will still be able to access some of their funds when they open on Thursday.

Many Cypriots are struggling to work out exactly what they could and couldn't do with the restrictions in place. Morning television talk shows hosted dial-ins with experts, with viewers' queries ranging from where they would repay loans if they were taken out from Laiki, which is being restructured, to how they could pay tuition fees for children studying abroad and handle check payments. Across the country, people wondered whether they would be able to access their salaries, many of which were due this week.

"I believe this will be a very difficult day for both people and bank employees because no matter how much information there was, things were changing all the time," said Costas Kyprianides, a grocery supplier in Nicosia. "Even us traders, like myself, have so many checks which I need to deposit so I can make ends meet."

During the bank closure, ATMs were working but quickly ran out of money. Those of the two troubled banks, Laiki and Bank of Cyprus, had imposed withdrawal limits of 100 euros a day.

"Up until last night things kept on changing," said store owner Antonis Arotokritou, wondering about how to go about dealing with checks. "There's an overall panic and uncertainty from both the bankers and the rest of the people."

The stock market announced it would remain closed on Thursday "in order to ensure the smooth functioning of the stock market and protect investors." It too has been closed since March 16.

"The Central Bank decided on some limitations, so we are sure that slowly, slowly we are going back to functioning of the banks without serious problems," the head of the parliament, Yiannakis Omirou, told AP. "Some problems I'm sure will be created but our people are ready to overcome the difficult moments we are passing."

Source: http://news.yahoo.com/cyprus-banks-open-limits-transactions-074110832--finance.html

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