Cyprus to impose bank controls

Cyprus will impose limits on money transfers and dispatch extra security guards to prepare for Thursday's reopening of the banks,which have been shut for almost two weeks to avoid a run

Cyprus will impose limits on money transfers and dispatch extra security guards to prepare for Thursday’s reopening of the banks,which have been shut for almost two weeks to avoid a run.

A banking official said Wednesday that new controls will include restrictions on large-scale transfers from the country’s two largest and most troubled lenders,Bank of Cyprus and Laiki. Both are being restructured and big depositors face losses of as much as 40 per cent.

But authorities are looking to increase the daily withdrawal limit from 100 euros to 300 euros,while payroll payments will be allowed in order to help businesses. The restrictions will be kept for at least a week until the situation stabilises,said the official.

BAILOUT NATION

Cyprus’ bailout deal is the fifth agreed on so far in the 17-strong group of European Union countries that use the euro since the debt crisis began in late-2009. A look at the rescue programmes so far.

GREECE

Greece has received two bailout packages from its euro zone partners and the IMF. Its problems began in late 2009,when the government admitted that public debt was far higher than official statistics showed. That led it to accept a bailout package of 110 billion euros in May 2010. As the economy kept weakening,the bailout was not enough and a second one was clinched for another 130 billion euros. It included a writedown on the value of government bonds to lighten the debt burden.

IRELAND

Ireland’s banks suffered from their exposure to the US mortgage market meltdown as well as to a collapse in the local housing sector. The government stepped in to guarantee creditors and deposits,but the move cost it dearly. As it rescued its banks,the costs grew and soon the government’s borrowing rates on bond markets rose so high it was unable to finance itself independently. It secured a 67.5 billion euro package in November 2010.

PORTUGAL

Portugal’s economy was weak. The government’s borrowing rates in bond markets kept rising on fears it finances would prove unsustainable. By April 2011 talks on a bailout began. In May 2011,the country agreed to a package of 78 billion euros in rescue loans.

SPAIN

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The main concern was that Spanish banks,which took huge losses on a collapsed real estate market,would force the Spanish government into rescue efforts it could not afford. The Spanish government agreed a deal in July 2012 with eurozone officials to get up to 100 billion euros in rescue loans directly for the banks. For a few weeks it seemed the Spanish government would also need rescue loans,but its borrowing rates in bond markets fell back down after the European Central Bank vowed to do ”whatever it takes” to save the euro. It created a new programme to buy a country’s bonds if needed,drastically boosting confidence in the euro zone states’ public finances.

CYPRUS

The country’s banks had taken huge losses from Greece’s debt writedown and the government also needed saving after it was overwhelmed by the cost of supporting its banks. Cyprus first formally asked for a euro zone and IMF rescue package in June 2012. The talks continued for months as Cyprus negotiated for a better deal,possibly involving Russia. The issue came to a head in March,when Cyprus agreed to confiscate a part of deposits in exchange for 10 billion euros ($13 billion) in rescue loans. That was rejected by the Cypriot parliament and after days of more negotiations a new deal was crafted.

(Sources: ASSOCIATED PRESS,Reuters)