NICOSIA, Cyprus--Cyprus's banks were bracing for a stampede of
nervous savers as lenders on the island reopened after a two-week
long hiatus.
But on the streets of the Cypriot capital early Thursday, there
was little sign of panic with only a handful of depositors--mostly
pensioners--waiting for the banks to formally reopen at noon (1000
GMT) local time.
Gregos Hadjisophoklis, a retiree, was queuing outside the
central branch of the Bank of Cyprus Pcl, the island's largest
lender, since nine in the morning, unaware that the bank would open
later than its usual business hours. But he was prepared to wait:
he badly needed cash to pay his rent and buy food.
"I have to get money because I have no [cash] card. It's been
very difficult," Mr. Hadjisophoklis said as he stood in the
pedestrian area in front of the bank astride the city's main Ledra
Street shopping district. "There may be no one here at the moment
but it's early; more will come."
For the moment though, the only crush at the branch was from the
swarms of foreign journalists that have descended on the island
over the past few days. At least a dozen camera crews were set up
near the bank where Mr. Hadjisophoklis waited, disappointed that
the bank queues many had expected to see this morning had yet to
materialize.
Some Cypriots said they would wait until the weekend to go to
the bank, fearing that a rush might topple the very banks that
Cyprus's government is struggling to protect.
"We want to wait until the dust settles. Yes, I'm disgusted, but
if we all withdraw money we will have nothing," said Aris Petasis,
chairman of Thucydides, a local think-tank, en route to visit his
wife in the hospital, and who said he had no plans to go to his
bank Thursday. In light of the protracted banking shutdown, many
local businesses were being flexible about meeting payments, he
said, and that has helped ease the burden for many Cypriots short
of cash.
Amid fears that nervous savers could descend on the island's
banks, late Wednesday the government rolled out aggressive capital
controls--the first country in the euro zone to do so--that are
expected to last at least a week, and possibly much longer, and are
aimed at stemming cash flows out of the country. The island's
central bank was also stockpiling billions of euros of banknotes
late Wednesday to cope with demand the following day, officials
said.
That cash was delivered to the banks by armored trucks on
Thursday, and despite the delayed opening of the branches, bank
staff arrived early to prepare for the day ahead. So did the
security personnel. One private security guard standing outside a
branch of Cyprus Popular Bank Pcl, the country's second-largest
lender, said that there were two private security contractors and
one policeman responsible for guarding each bank branch, with more
available as backup.
"I think that people are going to be mad but we have to be
patient," the guard, who identified himself only as Andreas saying
his company didn't permit him to talk to journalists. "It's going
to be a long day for us and very difficult."
Cyprus's banks have been closed since March 16, after the
government initially struck a surprise deal--since rejected--to tax
bank deposits in exchange for a 10 billion euro ($13 billion)
bailout from euro-zone peers and the International Monetary Fund.
Terms of a revised bailout, reached early this week, now foresees
the closure of Cyprus Popular, also known as Laiki bank, and a
massive restructuring of Bank of Cyprus.
That restructuring will also deliver a big blow to many
depositors in Cyprus's financial-services industry, long the pride
of this Mediterranean island nation. Those with more than 100,000
euros in their accounts at Bank of Cyprus stand to lose as much as
40% on their deposits, while uninsured depositors at Cyprus Popular
could lose as much as four-fifths of their money, according to
government estimates.
The government decree on capital controls, which will apply to
all depositors in Cypriot banks, will cap total transactions on any
card--credit or debit, and on transactions inside the country or
out--at 5,000 euros a month. The decree also caps withdrawals from
bank outlets or cash machines will be capped at 300 euros per
day.
People won't be able to take more than the equivalent of 3,000
euros in cash out of the country per person per trip. Business will
also feel the pinch, according to the, the central bank will review
any large commercial transactions over 5,000 euros before deciding
whether to approve them.
The controls apply to all banks in the country, while the only
organizations excluded from the measures will be the Cypriot state
and the country's central bank.
Antonis Kalogeridis, a 47 year-old construction worker waiting
outside a Cyprus Popular branch with two friends, said he's not so
worried about his savings but he has been squeezed by the two week
long bank holiday on the island.
"I stopped going to work two weeks ago because they stopped
paying us," Mr. Kalogeridis said. "I only just have a few thousand
euros in the bank so I don't really care what happens. It's just
the insecurity you feel. I'm planning to come and get 300 euros
every day."
Write to Joe Parkinson at joe.parkinson@wsj.com
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