articles | 29 May 2013

Call to ease capital controls to stop flight of companies

A leading accountant has called on Cypriot financial authorities to lift restrictions to avoid foreign investors and companies running out of patience and deciding to take their business elsewhere.

The plea from Kyriacos Iordanou, general manager of the Institute of Certified Public Accountants (ICPA), came just as the finance ministry and Central Bank were working on a new decree further easing customer transactions with financial institutions. The decree (the 14th) is set to be issued this Friday. The new relaxations in capital controls are geared at freeing up commerce, a central bank spokeswoman said, but did not give details.

It’s understood that one of the easements may involve allowing persons to open an account with any financial institution in Cyprus – something that has been prohibited since capital controls were enforced back in March. Another would allow persons to terminate fixed-term deposits before they mature, for the purpose of making a downpayment or purchasing real estate. This has been a demand raised by developers in particular.

Under the latest decree issued last Friday – and effective for one week – non-cash payments or money transfers from €10,000 to €15,000 per month per natural person in each credit institution are permitted, regardless of the purpose; and €50,000 to €75,000 per month per legal person in each credit institution regardless of the purpose.

Money transfers out of the country up to €5,000 monthly for any purpose are allowed. And the amount of cash someone can carry on their person per trip abroad is €3,000 (or the equivalent in another currency). ATM withdrawals are limited to €300 per day.

The list of foreign banks exempt from restrictions has risen to 14. They are: Arab Jordan Investment Bank SA, Bank of Beirut SAL, Banque BEMO SAL, Banque SBA, Barclays Bank PLC, BBAC SAL, BLOM Bank SAL, Byblos Bank SAL, Credit Libanais SAL, Jordan Ahli Bank plc, Lebanon and Gulf Bank SAL, OJSC Promsvyazbank, Privatbank Commercial Bank, and Russian Commercial Bank (Cyprus) Ltd.
In exchange for €10 billion in bailout funds from the EU, Cyprus was forced to agree to resolve its second-largest lender, Laiki, and recapitalise Bank of Cyprus (BoC) using a large chunk of deposits over €100,000.

In return, depositors will receive equity at the new BoC, which will also absorb certain assets that belonged to Laiki. Depositors have thus far lost 37.5% of their money in BoC with a further 22.5% frozen by the Central Bank to be used if necessary. Fearing massive outflows of capital, the Central Bank released only 10% from the remaining 40%. Foreigners doing business in Cyprus and holding accounts with banks here were spared neither the ‘haircut’ nor the subsequent restrictions.

Yet despite their losses, foreign companies are willing to give Cyprus a second chance, said Kyriacos Iordanou, general manager of the Institute of Certified Public Accountants (ICPA). “It seems the foreigners have come to terms with having lost a part of their money… but what they will not stand to lose is their business,” cautioned Iordanou. “So they are giving us a second chance, which we should not waste,” he added, alluding to the need to lift capital restrictions as soon as possible.

In the immediate aftermath of the haircut decision, the accountant said, many foreign businesses were thinkingabout closing up shop here and relocating. Since then, he added, some have reconsidered.
“We have definitely lost some companies,” Iordanou added, without going into specifics.

Source: Cyprus Mail

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