articles | 07 April 2015

Business sector lauds lifting of capital controls

The decision to lift capital restrictions showed that the banking system is stabilising, the banks’ association said recently, as the island put an end to a state of affairs introduced two years ago.

“The decision shows that the banking system is stabilising, a development that will help our collective effort towards the recovery and growth of the Cypriot economy even more,” the association said in a written statement.

The lifting was welcomed by RCB Bank, considered one of the island’s four systemic lenders.

“This development constitutes the end of a difficult era for the banking sector and the economy of the island at large,” RCB CEO Kirill Zimarin said in a written statement.

“The lifting of these restrictions will most certainly contribute to a faster recovery of the Cypriot economy and its return to growth.”

Zimarin said RCB could now offer its wide range of services to more Cypriot customers “who can now open accounts in a financially strong trustworthy and profitable Cypriot bank.” RCB Bank was established in 1995 and is one of the largest banks in Cyprus. It is also one of the European significant Banks, members of the SSM mechanism and under direct supervision of the European Central Bank.

Cyprus freed capital flows on Monday, ending two years of controls that set an unwanted precedent for the eurozone at the height of the bloc’s debt crisis.

The island became the first and, to date, the only eurozone member to impose controls, acting to stem a flight of capital from its banks in March 2013.

Bank of Cyprus was forced to seize a portion of clients’ uninsured deposits and convert it into equity to recapitalise in 2013, while the second-largest bank at the time, Laiki, was wound down.

Yet months later, Bank of Cyprus and Hellenic successfully raised capital from international investors.

Business groups also welcomed the lifting of the controls on Monday.

The leaderships of the Employers and Industrialists Federation (OEV), the Chamber of Commerce and Industry (KEVE) and the Investment Promotion Agency (CIPA) on Monday stressed the importance of the move.

In statements to Cyprus News Agency, they also noted that with the decision, announced by President Nicos Anastasiades on Friday, Cyprus was a step closer to the return to financial markets.

The only issue still pending for the full restoration of the banking system was the implementation of the foreclosures law, the organisations said.

The Director General of OEV Michael Pilikos described the lifting of the existing capital controls as a very positive development. “It is a very good move that normalises our banking system and sends the message abroad that we return as a full members of the eurozone”, he said.

Pilikos said, however, that in order for Cyprus to return to the international markets the House of Representatives must vote in the bill on foreclosures.

KEVE General Secretary Marios Tsiakkis, in his statements, said that it was a very positive development in that it marked the return of the banking system to international markets. It is also, he added, a step towards the restoration of the credibility of the banking system.

He also noted that the adoption of the bills regarding foreclosures would conclude the legal framework, within which the banking system is called to operate.

CIPA’s President Christodoulos Angastiniotis expressed his conviction that the lifting of the controls would not affect deposits, and no capital would be moved out of Cyprus. The economy of Cyprus regains its credibility and foreign investors see the decision as a very positive development, he said. What remained for the full recovery of the banking system is the adoption of the foreclosures bill, he concluded.

Source: Cyprus Mail

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