articles | 26 April 2013

Further easing of Cyprus' capital controls

A tenth decree issued by the Central Bank of Cyprus has further eased capital controls for transactions both within and outside the island.

Payments and money transfers (for any purpose) from one financial institution to another within Cyprus have been extended from €3000 to €10,000 monthly per individual. Payments and transfers from one bank to another within Cyprus are now capped at €300,000 per transaction for the purchase of goods and services. Any transactions over and above this amount – again for the purchase of goods or services – is permitted provided that documentation is presented.

Payments and/or transfers within the country, for transactions falling under a bank account holder’s usual business activity, are extended to €500,000 per transaction on submission of documentation; for amounts above €500,000, approval is required from a special supervisory committee. Money transfers abroad per individual per month (for any purpose) are extended to €5,000 from €2,000 previously. Payments within the country via debit, credit or prepaid card are allowed. And persons travelling abroad may take with them €3000 per trip (up from €2000) or the equivalent in another currency.

Authorities imposed the controls on March 28, fearing a run on banks after Cyprus agreed a €10bn euro) international bailout that forced major depositors at its two biggest lenders to pay part of the cost of the rescue. The restrictions have starved thebusiness world of cash. Also yesterday the regulator issued a separate decree for banks operating on the island which are either branches of foreign institutions or at least 50 per cent subsidiaries of foreign banks.

For subsidiaries, the parent company must furnish the Central Bank with a ‘letter of comfort’ confirming that, for the duration of the decree, the parent company shall support the liquidity of its subsidiary so that the latter is not forced to request emergency liquidity funds from either the Central Bank or the EU.

A parent company must also make arrangements to provide standby credit facility to its subsidiary at an amount equal to at least 30 per cent of its customers’ deposits.

Source: Cyprus Mail


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