Cyprus Capital Controls Through 2014

NICOSIA – Cyprus’ central bank chief says he expects all restrictions on bank money transfers and withdrawals to be lifted by the end of the year.

Panicos Demetriades says most, if not all, domestic capital controls are likely to be eliminated in the next few weeks.

Demetriades was quoted by the Cyprus News Agency as saying that getting rid of all restrictions — including unlimited money transfers abroad — depends on confidence being fully restored in the banking system and on the government making substantial progress in implementing the country’s rescue program.

The controls were imposed to prevent a run on the banks after Cyprus agreed in March on a multi-billion-euro international rescue plan that mandated a raid on uninsured deposits in the country’s two top lenders.

The government has been saying since last March, when it first accepted a 10 billion euro bailout program from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that it would lift restrictions on withdrawals and other capital limitations put in place to prevent a run on the banks.

President Nicos Anastasiades – after saying he wouldn’t do so – accepted demands from the lenders to confiscate 47.5 percent of bank accounts over 100,000 euros ($137,000) as part of measures to raise 13 billion euros ($17.8 billion) as part of the conditions for getting the bailout.

Since then the government has repeatedly said that the capital controls would be lifted imminently, only to keep pushing back the timetable. The country’s banks were pushed to the edge of ruin by bad loans to Greece businesses that failed and with huge holdings in Greek bonds that were devalued by 74 percent, a combination that brought 4.5 billion euros ($6.16 billion) in losses.

(Material from the Associated Press was used in this report)