Cyprus Mail
Business Cyprus

‘Cap controls are opposite of a solution’

By Stefanos Evripidou

FINANCE MINISTER Harris Georgiades yesterday accused the European institutions of trying to shift responsibility from one to the other regarding the imposition of capital controls and restrictive measures on Cyprus’ banking system.

Commenting on remarks by European Central Bank President Mario Draghi that capital restrictions fell within the responsibility of the European Commission, Georgiades said: “The clear position of the government is that the restrictive measures do not constitute a solution to the problems of our banking system, on the contrary their protraction has the exact opposite result.”

He noted that the government was conveying this view to the European institutions.

Cyprus is the only country in the eurozone where the EU’s basic principle of free movement of capital does not apply.

Capital restrictions were imposed after the Eurogroup’s decision to raid uninsured bank deposits in the island’s two biggest, most systemic banks, to ‘bail-in’ the country using depositors’ money, in turn unlocking a €10 billion troika ‘bailout’.

“We note the fact that on a European level there is embarrassment and it is obvious there is an effort to transfer the responsibility from one institution to the other,” said the minister, referring to the continuing capital restrictions.

He added that “it is the Cypriot economy that is paying the price of the decisions”.

For this reason, Georgiades said the government would “insist on alternative measures, based on European decisions, which will truly stabilise our banking system and create the preconditions for restarting the economy”.

Meanwhile, the Finance Ministry yesterday issued a fifteenth decree on capital restrictions, including additional provisions under which the termination of fixed term deposits is allowed prior to their maturity.

According to the latest decree, fixed term deposits can be terminated prior to their maturity in two further cases: to pay for medical expenses, and to repay outstanding debts to the state.

Under the new rules, a fixed term deposit belonging to a natural person may be broken to transfer to a sight/current account within the same credit institution the exact amount needed solely to pay for medical expenses to a medical care provider.

The second new exemption to early terminations relates to the transfer of money from the fixed term deposit to a sight/current account within the same credit institution to repay obligations to the Republic.

However, documents justifying the above payments must be presented to the bank, while the deposit can not be terminated prematurely if sufficient funds are available in a sight/current account in the same bank.

If the fixed term deposit is accessed for the above purposes, the remaining amount in the deposit must be kept there under the same conditions until it matures.

Furthermore, any new fixed term deposit that is created with funds from a sight/current account and/or from cash is not subject to the currently imposed restrictions on fixed term deposits.

The new decree also permits the transfer of €300 daily from a notice account of a natural person to a sight/current account of the same natural person within the same credit institution.

In addition, money transferred from abroad to a credit institution in the Republic and then re-transferred to a second credit institution in the country will be exempt from the ongoing restrictions, provided that the first credit institution clarifies in the details of the transfer that the money falls within category.

A sixth decree was also issued yesterday on the restrictive measures on foreign bank transactions.

The decree exempts one more foreign credit institution, the Open joint-stock company AvtoVAZbank, from capital restrictions on transactions of foreign banks, taking the total number to 16.

In addition, the decree adds new criteria to the definition of an “international customer” to include a corporation, trust, partnership or legal entity, whereby more than 90 per cent of the ultimate beneficial owners are non-resident natural persons and the remaining 10 per cent who are resident natural persons are not citizens of Cyprus.

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