Cyprus Popular or Laiki Bank has imposed cash withdrawal restrictions to prevent it from going bust as angry customers queued up at ATMs to withdraw cash. The cash withdrawal restriction means that customers will not be able to withdraw more than 260 euros (£221) a day from cash machines, as MPs ask for more time to reach a deal to save Cyprus economy. With banks closed until next week in a bid to avert a calamitous bank run, this is the only way for customers to get money.
The Parliament was due to vote on Thursday evening on ‘Plan B’ for Cyprus bailout. The ‘Plan B’ include raising 5.8bn euros (£4.9bn) which Cyprus needs to contribute if it needs to secure 10bn euros (£8.5bn) from eurozone partners and the IMF. If Cyprus is unable to raise this money by Monday, the European Central Bank (ECB) said it will cut off emergency support to the banks, letting them collapse, which would throw the country into financial jeopardy and, ultimately, cause Cyprus to leave the eurozone, followed by unpredictable consequences for the eurozone.
Last night, MPs rejected a proposal to seize up to 10% of all domestic deposits. The new plan involves a smaller grab to help small savers in a bid to restructure Cyprus banks. Amidst this chaos, Russia has come to the rescue of Cyprus by offering to pitch in, although the contribution would be smaller than that was hoped for. Nearly a third of all deposits in Cyprus banking sector are held by Russians.
A third bill proposes to restructure the heavily indebted banking sector which include measures to save Popular Bank from going bankrupt. Banks in Cyprus closed their doors last Friday and will stay shut until next Tuesday, but as rumours spread that the Popular Bank would never re-open customers rushed to cash machines to withdraw what they could. Panicky customers lined-up to withdraw as much money as they could. “I’ve been to five ATMs, looking for the one with the smallest queue. The others had really long queues, at least 40 or 50 people. There’s a lot of rumours that Laiki is going to go bankrupt and that (their ATMs) will stop giving out money”, Peter Larkin, a Nicosia resident waiting in queue with his five-year-old daughter, said.