Monday, March 25, 2013

Cyprus Capital-Controls Q&A

by Matina Stevis and Joe Parkinson

Wall Street Journal

March 25, 2013

Following the deal between Cyprus and its international creditors on a bailout, there are just as many questions as answers, particularly surrounding the imposition of capital controls. Here our reporters address some of the most pressing issues:

Q: What actions does Cyprus need to take to enforce the capital controls adopted with last week’s legislation?

A: The Cypriot parliament passed enabling legislation last week, giving the central-bank governor and the finance minister the power to take measures to stem capital outflows. The legislation is quite generic and allows the country’s top finance and monetary officials to impose measures ranging from daily ATM withdrawals to freezing domestic interbank lending, suspending direct-debit orders and converting checking accounts into time deposits. The law allows the finance minister or, when relevant, the central-bank governor, to “take whichever restrictive measure [they] consider necessary under the circumstances, for reasons of public order and/or public security.” A decree enacting this bill and laying out the specific details of the capital controls is yet to be issued.

Q: What capital controls are already being enforced (e.g. border checks, ATM limits)

A: Customs officials said border guards at the counrtry’s air and sea ports have been instructed to check baggage and monitor whether travelers are taking more than €10,000 (about $13,000) out of the country. Any amount above that €10,000 threshold can be confiscated. Daily ATM limits vary: at Popular Bank of Cyprus (Laiki), cash-machine withdrawals have been capped at €100 euros; at Bank of Cyprus, the limit is €120. Other ATMs are operating normally.


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