They’ve changed the story again. Late last week, when capital controls on banks were mooted, they were to be introduced ONLY if there was failure to agree a bailout funding arrangement with the Troika, but Cypriot politicians have now decided to introduce such controls on what they claim is a “very limited basis” even though there is now supposed to be a €10bn bailout in place. We can clearly see that they’re making it up as the go along, but it might take another few days to confirm that the Cypriot banking system is dead.
We have confirmation that Cypriot banks are to remain closed until at least Thursday; officials are referring to Thursday 28th March 2013, but the betting on here is that banks will remain closed until the Tuesday after Easter, 2nd April 2013, at which point Cypriots will not have had access to their bank counters for 16 days. Cypriots mark Good Friday 29th and Easter Monday 1st April as bank holidays.
There is now an information vacuum in Cyprus, and we don’t know how much cash has flowed out of the system already. Bank Laiki says that it has 1.35m customers and that will include corporate customers and individuals and businesses in the various countries across Europe where it operates. Limits on daily ATM withdrawals have ranged from €400 to €100. So you might have had over €500m per day withdrawn from that one bank. There is now also talk of funds being “bleeded” from foreign branches of Cypriot banks; it remains unclear if this means that Cypriot banks didn’t impose daily ATM limits on foreign withdrawals or if electronic transfers or counter withdrawals were available at foreign branches. If you were a responsible Cypriot politician then you would now be asking questions of your finance minister and governor of the central bank of Cyprus. Bad enough that your banking system is dead, in part because of actions by the EU, but worse if you have allowed the hot Russian money bleed out of the system, thereby increasing the burden on domestic depositors. Can’t Cypriot politicians do anything right? And how many Cypriot politicians have taken advantage of foreign transactions in the past 10 days?
We still don’t have details of the capital controls – you’ll find a rough English translation of the capital controls bill that went before the Cypriot parliament here – that will be imposed for what the Cypriot president and head of state has described as a “very temporary period”. We can assume that the ECB is still providing emergency liquidity assistance to Cyprus after the deadline of midnight on Monday expired for Cyprus to have a bailout funding programme in place. Last week, reports suggested the ECB had €9bn of ELA advanced to Cypriot banks, that’s likely to have increased, but how high can it go? In the case of Ireland, the ECB had advanced €190bn or 120% of GDP at the peak. 120% of Cypriot GDP of €18bn would be €22bn but with deposits flooding out at a rate of €500m per day, that limit will be quickly reached.
So, when will matters come to a head? Will the ECB balk at providing ELA beyond €22bn, which could be required some time next week? Will Cypriots kick their government out if banks don’t re-open or if unacceptable capital controls are introduced? If there is capital flight and runs on banks, how long will they last and will they break the banking system?
One thing is for sure, with the Cypriot economy heading for a nose dive, with the destruction of its offshore banking and insurance, with the damage inflicted on its banking system and on its society, little Cyprus with its 1.1m citizens and its €18bn GDP economy has been treated atrociously by its partners in Europe.
NAMA Wine Lake 
Crprus had its economy, banking system and every fiber of its structure and existance, including every law abiding citizen / resident raped and violated by the maurading gang of terrorists in the name of a stable Europe…this barbaric act is way beyond comprehension….
Edward,
Instead of blaming Europe and Germany, can you give us a constructive view of what you believed the correct solution should be.
In my humble opinion, I don’t believe there was/is much room for alternative solutions.
If we start with a limitation of national debt to enforce on a nation, limiting the loans available to Cyprus at €10bn, then the question is where to raise the additional money.
Unfortunately, Cypriot banks do not have sufficient other forms of capital, with limited subordinated bonds and unsecured bonds.
It was always unlikely that the EU were going to give further aid/charity to the Cypiot government. (anyone who believes there should be further transfer of wealth from wealthy nations to poorer one beyond existing EU funds transfers are delusional, in my humble opinion).
So I believe there was no other alternative than having the funds raised internally to the Cypriots. Limited ability to raise via tax, so the last resort was to tax/penalise depositers.
The alternatives to the nation of lack of support from the ECB would be a collapse of the banking system. Perhaps, namawinelake is correct that it will collapse anyway, but this way small depositers at least will eventually get access to their cash.
What happens when you divide by zero?
The Cypriots, thanks to the EU number crunchers, are about to find out!
http://www.japlandic.com/2013/03/divide-by-zero.html
@ Edward Smith, same as what happened here in Ireland under FF.
London branches closed yesterday and today,will hit up the drinklink-ATM-later figure out what daily max is here.
Via the always worth reading zero hedge.
“By Sunday, one participant in the negotiations said, there was almost no capital left in Laiki, a bank whose market value peaked at 8.1 billion euros in November 2007. Laiki’s former vice chairman Pavlou disagreed, estimating there had been 2.5 billion euros in foreign deposits alone.”
http://uk.reuters.com/article/2013/03/25/uk-eurozone-cyprus-muddle-insight-idUKBRE92O0TO20130325
Smacked up the bank of cypress drinklink,not allowed take a 1,000 out.
By the way it’s run by Lloyd’s,max was 800 but it paid out !
Have few photos. No idea how post them,also closed ….notice in window.
@John, thanks but all photo shows is that the bank is closed on Good Friday 29th March and Monday 1st April, that is, Good Friday and Easter Monday. What will be interesting is whether Cypriot banks open on Thursday as signalled. If you were a betting person, you would have to say the odds of a full counter service on Thursday not being very good.
Coming to a bank near you………..
“If we have even more instruments in terms of bail-in and how far we can go on bail-in, the need for direct recap will become smaller and smaller… let’s deal with the banks within the banks first.”
“The money snatchers”, starring the three stooges, AKA “the troika”
Iceland still has capital controls in operation. It’s not the end of the world. It affects large depositors more than small.
The comment about deposits bleeding out is silly. at 500 notes a day you would take 200 days to bleed an account up to the 100k limit where haircuts are imposed. So it is not possible that Russians have bled their accounts dry through London’s ATMs.
The EU/IMF has lent Cyprus 10bn but won’t go beyond that as any more would be too great a burden to repay. Any one of us who believe that euro taxpayers should go further and gift money to Cyprus is free to transfer his own money to the Central bank of Cyprus.
To many Irish people’s chagrin, Ireland had just enough money to recapitalise its banks from the NPRF savings and the bailout cash while keeping our debt burden just within the limits of sustainability. Cyprus did not have this option as the sums were too great and so they have had creditor losses. Ireland has had to pay more but will emerge stronger and sooner than Cyprus.
There is no chance of the ECB balking at recapitalising the Cypriot banks now that there is a programme in place. If they did this then what incentive is there for other banks and countries to bend to the will of the ECB? Remember the ECB authorised the 24bn recap of anglo when it was clearly dead, along with another 160bn odd in other morbid Irish banks. Will/did the ECB get this money back?yes mostly (but they slipped as some monetary financing by changing the loan terms in our favour)
The Cypriots created their situation. They chose to join the EU and the euro. They chose to make themselves a depository for Russian cash, a nation that even the Swiss are loath to deal with. They let their banks heavily invest in Greek debt in the late stages of the Greek crisis. They facilitated a huge Cypriot property bubble by allowing their banks to suddenly lend huge amounts to local politically connected developers while property rose 50% in 2 years( 2006-2008). The government over committed itself to public sector wage rates which could not be sustained without an endless property bubble. Private sector wages rose with the inflated economy.Blow, blow, blow, blow……POP!
Isn’t that what happened in Ireland? Why, yes it is.
The Cypriots are not being forced into this path. They made their own choices in the past and they can now choose to leave the Euro and the EU. They do not have to accept the 10bn cheap loan or the programme conditionalities. They can choose to go it alone. But they won’t.
@Ian C. No-one can disagree with your synopsis of the run-up to, and the causes of the current mess, whether in Cyprus or in Ireland.
Where I take issue is in relation to the responses to that mess. I firmly believe that it would have been better for the future of both countries if the banks had defaulted and not paid the bondholders. These were private companies, their losses should not have been laid on the wider citizenship. It is not the capitalist way, but ironically it does seem to be the socialist way!
If that meant leaving the euro, so be it. I believe that both countries would be more competitive and with less pain to their citizens, if they had opted for a new devalued, separate, and stand alone currency.
But Cyprus is imposing losses on bondholders, presumably in proportion to their legal preference during liquidation.
Ireland did not impose losses on bondholders as it had extended an irrevocable legal sovereign guarantee to all bank bondholders in 2008. This guarantee was endorsed not just by the last government but by a majority of the current government. When the guarantee expired in 2010, the ECB insisted on us repaying seniors. At that stage there were not many seniors to be repaid and Ireland was dependent on the troika for funding and not in a position to set the rules,
Even had the state not gone for the blanket guarantee in 2008, this would have been followed by a run on the irish banks, a lockout of the irish sovereign from bond markets, the early arrival of the IMF/EU and then the recapitalisation of the banks at the behest of the troika. Back to square 1
You can argue that it would have been better had the troika allowed us to burn bank creditors in 2008 and had we not passed a blanket guarantee. Yes, let’s build a time machine and go back to 2005, regulate our banks so that we have sufficient information to distinguish between insolvency and lack of liquidity, then we’ll know not to guarantee the banks, then let’s persuade the troika not to make us recapitalise our banks but instead to carry out an act that risks contagion across the eurozone banking system to save Ireland money.
Really I feel that no matter what choices were made by Ireland and the troika at that time, there still would be some painful spending readjustment in the private and public Irish purse because you can’t run a deficit forever. There would still be a host of economists and analysts decrying the idiocy of any policy choice, all the time ignoring the root causes: the 10yr credit powered property bubble and the unsustainable public spending commitments.made on the basis that the bubble would never end.
@NWL I will be outside with a few bob,at 9am…not a chance it opens!!
But interestingly the ATM is “run” by Lloyd’s max was 800.
@John, thanks! So what you are saying is even though there is a €100 ATM limit on withdrawals in Cyprus, there is a daily withdrawal limit of €800 (or GBP 800) from Bank of Cyprus (UK). If that is correct, it demonstrates a real discrimination against Cypriots in favour of foreign deposit account holders. If you have a piccy of the the €800 or GBP 800 withdrawal, that would be interesting (or dynamite!)
Please check inbox,also send via twitter:)
@NWL I bank with Chase…slipped in the card punched in my code…asked for a grand…message was max is 800…voila it paid out bank of cypress ATM next to The Charlotte Hotel.
Photo ?
@John, not sure what that shows, you have inserted a Chase debit or credit card into a Bank of Cypress ATM and are allowed withdraw GBP 800, but this is really a Chase withdrawal isn’t it, even though you are using a Bank of Cypress ATM.
Ok off to lurk around bank cypress ATM:)
John, Is the bank account (the source of the funds) in the Bank of Cyprus or in Chase?
@WSTT the wife doesn’t even ask that….Chase AC debit card used,will grab next AC holder using it.
@John, if you can nab a Bank of Cyprus bank account holder withdrawing GBP 800 when domestic Cypriot account holders are limited to €100, then that would be dynamite.
@jg yep, skip that nice bar, get yourself a hip flask and do that! Dont frighten them away at the teller though ok :)))
Yeah I’m NOT an AC holder…yet so it’s paying me out but agreed,not an actual AC holder…I can wait outside for an AC holder probably best.
Bit chilly and the bar is so nice……will keep an eye open for AC holder,but realistically tomorrow.
@NWL live outside ATM…not a sinner in sight will stay here for a while…she who must be obeyed not amused !!!
@NWL other phone with sign bout closing,indicates that NO representative available until Saturday by phone-resend ?
@John, this is the closed notice you’ve sent me. Can only see closure on Good Friday and Easter Monday.
Can you zoom in to notice regarding customer service?
Not a fecking soul in sight….jay…..sus!
Will resend photo.
@John, zoom in doesn’t work, just gives larger picture at lower resolution.I can make out “customer service lines will operate Saturday 30th March 2013 9.30am until 12.30pm”
@DJ thanks….will stay at my post…yes hip flask excellent idea was at beretta yesterday,shoulda coulda ….
Here’s a bit of reading for ya from the ‘social responsibility’ button on the Bank of Cyprus website http://www.bankofcyprus.com/en-GB/Start/Social-Resoibsibility/Social_Responsibility/ :
In its more than 113 years in existence, Bank of Cyprus Group has proven its immense contribution to society.
No matter where they are in the world, the 11.000 people making up the Group share the vision of a more humane society, and have made a shared commitment – the commitment to benefit every community in which they operate.
For Bank of Cyprus staff, feeling responsible is a state of being, a way of doing things. It is part of our collective consciousness. From its establishment to the present day, the Group’s main concern has been people.
We invested – and continue to invest – in our people, education, the arts, health, culture, the environment and sport, strongly believing that this is the best possible way to support a society with a vision and a future
Will wrestle someone to the ground tomorrow,it’s next door the bank.
Off break a few plates at famous Greek/Cypress restaurant,any decent intel will post.
Pints later.
@NWL yes I can’t even open a AC by phone until Saturday..or move check one if I say wanted wire some funds…it’s basically shut!
@John, again this tells you it is partly open on Easter Saturday amidst the Easter holidays but it doesn’t rule out being opened on Thursday 28th March, 2013, does it?
Tells me that their is NO fecking hope of it reopening before Tuesday,at best.
No one answering calls until Saturday with a very small window..anyone tried online to open an AC..I can try later.
@John, just tells me arrangements over bank holiday weekend, but doesn’t rule out service on Thursday 28th March 2013, which is when the Cypriot government is presently saying banks will re-open.
@NWL……I will be outside at 9…..about as much chance as Fingers giving/paying back his ahem “bonus”,great read well done Tom Lyons.
Ok been stationed outside now for half hour…two other withdrawals above 100 English….alas NOT bank of cypress customers also a bit startled to be question…possibly the Irish accent.
Back outside tomorrow.
@John, you’re a star. I can’t imagine Will Goodbody at RTE or one of those lads or lasses going beyond the call of duty like that. Well done! Will pick up tomorrow.
@NWL the reaction is priceless…kinda like starting up conservation in bathroom ….both customers looked around grabbed their cash moved off briskly.