The central bank now stands accused of not doing enough to control the movement of capital. Transfers for humanitarian aid were permitted which, while certainly an acceptable exception, opened a loophole for abuse. Many are also furious that the bank allowed "special payments," the definition of which was never adequately established.
The Cypriot central bank has defended itself by saying that it was impossible to completely prevent all transactions, despite the account freeze. Much of the money was withdrawn from overseas, where Cyprus had no authority. Branches of Cypriot banks in non-euro-zone countries such as Russia and Britain do not answer to the European Central Bank. Their liquidity is controlled by central banks in those countries.
Such a defense is nothing less than a voluntary admission of impotence. Holders of smaller savings accounts have been unable to access much of their money for almost two weeks, companies have been unable to pay their suppliers and across the country people are concerned that their salaries will not arrive on schedule on the first of the month. Meanwhile, rich businesspeople and those with connections overseas have been able to transfer their money into foreign accounts.
Parliament in Nicosia is suspicious. Lawmakers have demanded that the central bank assemble a list of those customers who withdrew large amounts of money prior to the closure of the country's financial institutions. In particular, parliamentarians want to know if central bank employees or members of the government received early warning and were able to quickly rescue their assets.
Bank customers could suffer for much longer and experts say that those with more than €100,000 in their accounts stand to lose up to 90 percent of their deposits. According to the Greek television station skai, Cypriot banks will remain closed until April 1. And economists forecast a deep recession for Cyprus with high unemployment, comparable to that which has gripped Greece in recent years.
Wednesday, March 27, 2013
Large Russian Depositors Likely Got Their Money Out of Cypriot Banks Without a Haircut
Looks like many of those large Russian depositors, the ones the ECB wanted to punish, probably took their money out of Cypriot bank branches in London and Russia, which remained open. What this means is that pensioners who have been saving a lifetime and local super market owners will be almost completely wiped out as there won't be enough bank capital left for them to retain almost anything. From Spiegel: