Saturday, 23 March 2013

A Review of the Legislation Passed in Cyprus

Although I unfortunately could not get my hands on the actual bill proposed and passed at the Cypriot Parliament yesterday, a description of the measures is the following:

1. Creation of a National Solidarity Fund whose purpose is the funding or financial support of banking institutions, assisting and supporting their recapitalization or promote and contribute to the Republic's funding. The Fund's income will be derived from natural gas revenues or bonds or other securities the Fund will issue and sell.

2. Power to the Minister of Finance or the Central Bank Governor to impose restrictive measures in banking transactions in case of emergency. These measures up to now are (the provision for the increase of these measures exists in the legislation):
    • Maximum amount of monthly withdrawal €10,000
    • Term Deposits are forbidden from premature ending
    • Obligatory renewal of all term deposits ending over the next period (unspecified)
    • Restriction in the creation of new banking accounts
    • Current accounts to be transformed into notice accounts
    • No-cash transactions to be limited
    • Cashing of cheques and interbank transactions to be limited
    • Limitation of the public's transactions with the banks
3. Division of Laiki (Popular) Bank to a good bank/bad bank scheme. All depositors who possess up to 100,000 in the bank will be insured. The percentage of the uninsured deposits to be lost is yet to be formally announced. Good assets and liabilities from Laiki Bank will be merged with the ones of the Bank of Cyprus PLC (the island's largest banking institution). A liquidator will be assigned in order to collect non-performing loans by Laiki.

All other laws passed yesterday by the Cyprus Parliament were Amendments to previous legislation, giving more power to the Central Bank to monitor, obtain information and intervene in banking institutions with the purpose of promoting recovery plans, providing for the creation of an integrated recovery framework and increasing early intervention measures.

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