Bank customers in Cyprus will finally get access to their money starting tomorrow, but they’ll see more than just cash when they drop in for a visit. With concerns about bank runs and unrest running high, the branch offices will now have more security to control the crowds expected to show up at the teller windows across the island nation:
Cyprus will impose limits on money transfers and dispatch extra security guards to prepare for Thursday’s reopening of the banks, which have been shut for almost two weeks to avoid a run during the country’s financial drama.
A banking official said Wednesday that new controls will include restrictions on large-scale transfers from the country’s two largest and most troubled lenders, Bank of Cyprus and Laiki. Both are being restructured and big depositors face losses of as much as 40 percent. …
Meanwhile, private security firm G4S will install 180 of its staff at bank branches across the island to keep a lid on possible trouble, said John Argyrou, managing director of the firm’s Cypriot arm.
“Our presence there will be for the comfort of both bank staff and clients, but police will also be present,” he said.
The cash limits on withdrawals aren’t terribly onerous, and won’t last too long:
But authorities are looking to increase the daily withdrawal limit from 100 euros to 300 euros (from $130 to $386), while payroll payments will be allowed in order to help businesses, which saw a huge slump as people cut down on their spending amid the uncertainty swirling about the banks.
The restrictions will be kept for at least a week until the situation stabilizes, said the official, who spoke only on condition of anonymity because the measures have yet to be officially announced.
That’s about the same level as ATM limits on cash withdrawals and advances, but applied at the teller window. The banks want to prevent customers from yanking out all of their cash at once, which would crash what’s left of the banking system — an impulse that the terms of the bailout stoked. The money taken by Cyprus for the bailout will already be gone when the banks reopen, so a run won’t protect any assets.
At least that’s what Arghyrou hopes:
John Arghyrou, managing director of the Cyprus business for G4S, said its 750 employees have been working through the night, going out to replenish cash machines with police guard. Licensing rules prevented the firm from bringing in extra staff to handle the unprecedented workload.
“Demand is greater than we can provide… We haven’t closed since the crisis started,” he told Reuters. “I’ve never seen anything like it in terms of what is going on from a security perspective. I would say the workload has quadrupled because the whole system has changed.”
Arghyrou would not comment on whether more cash has been flown in to replenish the vaults so that banks are ready to open on Thursday, but said he did not expect a bank run.
“People have had time to digest the agreement so maybe there won’t be that scenario whereby people run to the banks to withdraw,” he said.
“I don’t see people panicking, I see people worrying about what the next day will hold for them, whether the next day they will have a job. I see people having a lot of questions and waiting for answers.”
World markets are also waiting to get some answers:
Sentiment in the world’s markets remained fragile Wednesday as investors awaited the details of the capital controls Cyprus is expected to introduce when its banks reopen.
The country’s banks, which have been closed for the best part of two weeks, are due to start doing business again on Thursday following an international bailout agreement that’s caused jitters around the world — but particularly in Europe — over the safety of deposits. Under the terms of the bailout, Cyprus is closing its second-largest bank Laiki and raiding big deposits in it, as well as in Bank of Cyprus.
“Markets are eagerly waiting to read the Cypriot government’s capital control measures,” said Alastair McCaig, market analyst at IG. “As capital control measures are still in place for Icelandic depositors following their banking collapse five years ago, it does call into question the Cypriot government’s insistence that these will only be ‘temporary’.”
In Europe, the FTSE 100 index of leading British shares was down 0.5 percent at 6,366 while Germany’s DAX fell 0.8 percent. The CAC-40 in France was 1.4 percent lower at 3,698.
Tomorrow should provide a lot of those answers. If Cypriots have absorbed the deal and have any confidence in the banking sector, they’ll at least keep their cash at or below guarantee levels in their accounts. If not, well … those banks are going to need a lot more security than what they’ve added.