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24th Sep 2020

Cyprus lifts last capital controls after two years

  • Back in business. Cyprus lifted its last remaining capital controls on Monday (Photo: Berge Gazen)

Cyprus has lifted its last remaining capital controls just over two years after becoming the eurozone’s first country to impose cash restrictions.

Under measures which came into force on Monday (6 April), there will no longer be a monthly cap of €20,000 on transfers by individuals to foreign banks, or of €10,000 for travellers moving money out of the country.

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On Friday (3 April), Cypriot president Nicos Anistasiades said that the removal of the remaining cash limits marked “the full restoration of confidence in our banking system and the stabilisation of economy of Cyprus”.

The eurozone's first ever capital controls were introduced on the island two years ago amid fears of a massive bank run prompted by a clumsily agreed EU bailout of the Cypriot economy and the Greek debt crisis.

The concerns followed a decision by the EU to impose losses on depositors holding more than €100,000 as part of a €10 billion bailout, that also included the shutting down of its second largest bank Laiki and the restructuring of the the largest lender, the Bank of Cyprus.

The EU had argued that Cypriot banks had become a haven for money laundered by Russian businessmen, and had built up unsustainable liabilities which had amounted to more than nine times the size of the Cypriot economy.

Meanwhile, Cypriot banks took a €4.5 billion hit - worth around 25 percent of the country’s annual economic output - as part of the haircut imposed on holders of Greek government bonds in late-2012.

Amid the political turmoil that surrounded the negotiations on the deal - which originally was going to target all depositors - the Cypriot government set restrictions on bank money transfers and withdrawals, with a daily cash withdrawal limit of €300, although most of these were lifted by the end of 2013.

Having suffered three consecutive years of recession - albeit more modest than originally forecast - the Cypriot economy is expected to return to growth in 2015.

Neighbouring Greece is now coming under increasing pressure to impose restrictions as panicked savers continue to move their money elsewhere amid fears that they could be forced out of the currency bloc. More than €10 billion in deposits were removed from Greek banks in the months of January and February, according to data from the European Central Bank.

For its part, Iceland continues to have rules on cash-flow seven years after imposing them in the wake of its own domestic banking crisis.

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