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Cyprus lifts local bank restrictions, gradual recovery says FinMin

31 May, 2014

The Cyprus government has lifted all restrictions in domestic banking on Friday, with the final hindrance of opening local accounts now removed, due to a satisfactory rate of local liquidity and a reduced risk of capital flight.
In televised statements on local channels on Friday night, Finance Minister Haris Georgiades said that the effort to bring the economy back on a recovery path is at its peak and that he sees a gradual growth in economic activity by 2015.
In the 30th decree issued since the Eurogroup of Eurozone finance ministers imposed harsh austerity measures 14 months ago as part of a 10 bln euro bailout that brought the banking sector and the economy to its knees, the unrestricted opening of accounts is now allowed, while a further relaxation on foreign banks allows opening new accounts for new indirect credit facility, that is a letter of guarantee, and a letter of credit, in two cases.
The Ministry of Finance said that in the first case of opening a current/sight account to service a loan, the credit balance of the account cannot exceed 120% of the loan balance.
Second, in the case of an indirect credit facility, the credit balance of the sight/current account can not exceed 120% of the balance of the indirect credit facility.
The Ministry of Finance said that the basic goal is the gradual lifting of all temporary restrictions, based on a concrete roadmap agreed with the Troika of international lenders last August, in order to enhance growth efforts.
Certain milestones have been inserted in the roadmap, the Ministry explained, through which the lifting of all domestic restrictions was made possible.
The Ministry of Finance said there were positive developments, such as the outcome of the last Troika mission review - the fourth in a row - earlier in May, as well as upgrading of the Cyprus sovereign by rating agencies, adding that these allow for the lifting of domestic restrictions.
The government said it will proceed “systematically” to relax and lift all restrictions in international transactions.