News / Europe

Banks in Cyprus Remain Closed After Bailout

Cyprus Banks Remain Closedi
X
March 26, 2013 9:06 PM
People with more than $130,000 deposited in Cypriot banks could see about 40 percent of their deposits turned into bank shares, the country’s finance minister has warned. The news comes after Cyprus struck a deal with the European Union and the International Monetary Fund in which the island nation will get $13 billion in aid. But to earn it, Cyprus has to overhaul its banking sector. As Selah Hennessy reports from London, analysts say the result could be crippling.
Selah Hennessy
Depositors with more than $130,000 in Cypriot banks could see about 40 percent of their deposits turned into bank shares, the country's finance minister has warned. The news comes after Cyprus struck a deal with the European Union and the International Monetary Fund in which the small Island nation will get $13 billion in aid. To earn that money, though, Cyprus has to overhaul its banking sector and analysts say the result could be crippling.

Banks in Cyprus closed their doors on March 15, and they have not yet re-opened. The trickling cash flow already has taken its toll on the economy.

Small businesses say they are doing very little trade, and some say they already have had to lay off employees.

The worst likely is still to come, though, because the deal struck with international lenders aims to shrink the Cypriot banking sector, which is about eight times the size of the economy.

The country's biggest lender, the Bank of Cyprus, will be radically restructured and Laiki Bank, the second largest, is set to close. The bank employs 8,000 people - a massive blow for a small country with a population of less than 1 million.

Cyprus Central Bank Governor Panicos Demetriades (L) and Cypriot Finance Minister Michael Sarris listens to reporters' questions during a news conference in the building of the Central Bank of Cyprus, in Nicosia, March 26, 2013.Cyprus Central Bank Governor Panicos Demetriades (L) and Cypriot Finance Minister Michael Sarris listens to reporters' questions during a news conference in the building of the Central Bank of Cyprus, in Nicosia, March 26, 2013.
x
Cyprus Central Bank Governor Panicos Demetriades (L) and Cypriot Finance Minister Michael Sarris listens to reporters' questions during a news conference in the building of the Central Bank of Cyprus, in Nicosia, March 26, 2013.
Cyprus Central Bank Governor Panicos Demetriades (L) and Cypriot Finance Minister Michael Sarris listens to reporters' questions during a news conference in the building of the Central Bank of Cyprus, in Nicosia, March 26, 2013.
James Ker-Lindsay, Cyprus expert at the London School of Economics, said the whole economy will be affected.

"This deal has the potential to be completely devastating for Cyprus. The banks are a major part of the Cyprus economy," said Ker-Lindsay. "There is going to be a lot of businesses which will have lost money in all of this. This will trickle down through the economy. It will be absolutely enormous, the effects of this."

This EU/IMF deal differs from other euro zone bailouts because, instead of taxpayers footing the bill, depositors with large balances are bearing the costs. Cyprus academic Vassilis Monastiriotis said it is a major shift in euro zone policy.

"We had the most similar case of Ireland. We had the decision to push the bill to the taxpayer so the government, the Irish government took the responsibility of recapitalizing the banks, the deposits were guaranteed, and then this spilled over to the real economy," said Monastiriotis. "The case of Cyprus is exactly the opposite. It is the bond holders, the shareholders, and the depositors that take up the bill, and then we try to minimize the implications to the government."

On Monday the head of the Eurogroup, Jeroen Dijsselbloem, suggested the rescue program for Cyprus could be a new template for resolving the banking crisis in Europe. He said, "If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute to recapitalizing the bank, and if necessary, the uninsured deposit holders."

Related video report by Mil Arcega
Cyprus Crisis Agreement Could Lead to Credit Crunch, High Unemploymenti
X
March 26, 2013 11:47 PM
Financial uncertainty for the island nation of Cyprus is far from over. Despite narrowly averting bankruptcy and securing a 13-billion-dollar bailout, economic pain may be just beginning. Economists say the country will pay a price in higher unemployment, bankruptcies and a credit crunch as it struggles to right its troubled banks. Mil Arcega reports.
Following his comments, financial markets dropped. Monastiriosis said it would be a dangerous precedent to set.

"There is a big risk of destabilizing the banking system of the euro zone with this kind of solution because the savings above 100,000 euros are not guaranteed anywhere in the euro zone. This may lead to very significant outflows of capital from the euro zone - definitely from the south of the euro zone to the north. But also potentially outside of the euro zone, and this will create more problems then it solves," said Monastiriosis.

For now, though, it is the Cypriots who have to cope with the immediate impact of their banking situation.

You May Like

WHO: Anti-Ebola Efforts Should Focus on West Africa

Official says WHO is 'reasonably confident' countries bordering those hardest hit by the Ebola outbreak are not seeing the virus crossing their borders More

South Sudan Crisis Threatens Development

Economic costs and lost development opportunities in South Sudan have erased what little progress the country has made since independence in 2011 More

Ukrainian PM Warns: Russia May Try to Disrupt Sunday Poll

Arseniy Yatsenyuk orders full security mobilization for parliamentary election to prevent ‘terrorist acts’ from being carried out More

This forum has been closed.
Comment Sorting
Comments
     
by: NVO from: Cyprus
March 26, 2013 2:31 PM
Yesterday, reported on something very disturbing (at least to Cyprus’ citizens): despite the closed banks (which will mostly reopen tomorrow, while the two biggest soon to be liquidatedbanks Laiki and BoC will be shuttered until Thursday) and the capital controls, the local financial system has been leaking cash. Lots and lots of cash.

Alas, we did not have much granularity or details on who or where these illegal transfers were conducted with. Today, courtesy of a follow up by Reuters, we do.

The result, at least for Europe, is quite scary because let’s recall that the primary political purpose of destroying the Cyprus financial system was simply to punish and humiliate Russian billionaire oligarchs who held tens of billions in “unsecured” deposits with the island nation’s two biggest banks.

As it turns out, these same oligrachs may have used the one week hiatus period of total chaos in the banking system to transfer the bulk of the cash they had deposited with one of the two main Cypriot banks, in the process making the whole punitive point of collapsing the Cyprus financial system entirely moot.


by: IDUEHE from: Enugu
March 26, 2013 10:53 AM
Why such threat to the banking system, it is keeping down the growth of business as customers who are banking with them will experience stillness in their businesses. University of Nigeria http://www.unn.edu.ng defines it as inhumanity in business

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
After Decades of Pressure, Luxembourg Drops Bank Secrecy Rulesi
X
October 21, 2014 12:20 AM
European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video US ‘Death Cafes’ Put Focus on the Finale

In contemporary America, death usually is a topic to be avoided. But the growing “death café” movement encourages people to discuss their fears and desires about their final moments. VOA’s Jerome Socolovsky reports.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.
Video

Video Young Nairobi Tech Innovator on 'Track' in Security Business

A 24-year-old technology innovator in Nairobi has invented a tracking device that monitors and secures cars. He has also come up with what he claims is the most robust audio-visual surveillance system yet. As Lenny Ruvaga reports from the Kenyan capital, his innovations are offering alternative security solutions.
Video

Video Latinas Converting to Islam for Identity, Structure

Latinos are one of the fastest growing groups in the Muslim religion. According to the Pew Research Center, about 6 percent of American Muslims are Latino. And a little more than half of new converts are female. VOA’s Carolyn Presutti travelled to Miami, Florida -- where two out of every three residents is Hispanic -- to learn more.
Video

Video Exclusive: American Joins Kurds' Anti-IS Fight

The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video South Korea Confronts Violence Within Military Ranks

Every able-bodied South Korean male between 18 and 35 must serve for 21 to 36 months in the country’s armed forces, depending upon the specific branch. For many, service is a rite of passage to manhood. But there are growing concerns that bullying and violence come along with the tradition. Reporter Jason Strother has more from Seoul.
Video

Video North Carolina Emerges as Key Election Battleground

U.S. congressional midterm elections will be held on November 4th and most political analysts give Republicans an excellent chance to win a majority in the U.S. Senate, which Democrats now control. So what are the issues driving voters in this congressional election year? VOA National Correspondent Jim Malone traveled to North Carolina, one of the most politically competitive states in the country, to find out.
Video

Video Comanche People Maintain Pride in Their Heritage

The Comanche (Indian nation) once were called the “Lords of the Plains,” with an empire that included half the land area of current day Texas, large parts of Oklahoma, New Mexico, Kansas and Colorado.The fierceness and battle prowess of these warriors on horseback delayed the settlement of most of West Texas for four decades. VOA’s Greg Flakus reports from Lawton, Oklahoma, that while their warrior days are over, the 15,000 members of the Comanche Nation remain a proud people.
Video

Video Turkey Campus Attacks Raise Islamic Radicalization Fears

Concerns are growing in Turkey of Islamic radicalization at some universities, after clashes between supporters of the jihadist group Islamic State (IS) or ISIS, and those opposed to the extremists. Pro-jihadist literature is on sale openly on the streets of Istanbul. Critics accuse the government of turning a blind eye to radicalism at home, while Kurds accuse the president of supporting IS - a charge strongly denied. Henry Ridgwell reports from London.

All About America

AppleAndroid