Cyprus banks reopen under strict capital controls in financial crisis

After being closed for nearly two weeks due to the negotiations over a financial bailout by Troika leaders, the financial institutions of Cyprus have finally reopened as scheduled, but they will operate under strict capital controls.

Those looking to access their accounts were met with long lineups on the sidewalks and on the street outside of their respective banks, even hours before the banks were scheduled to open their doors.

It has been reported that the banks will only operate for six hours and depositors will only be permitted to withdraw 300 euros ($383) from their accounts per day per person and payments will be limited to 5,000 euros ($6,000). Travelers looking to leave the nation island cannot withdraw more than 3,000 euros ($3,831). The purpose of these tight restrictions was to avoid panic and massive runs on the banks.

“These measures are temporary. The central bank of Cyprus and the government of Cyprus will review them each day, with a view to progressive lifting of the measures as soon as circumstances allow,” the Cyprus Finance Ministry said in a statement.

On Wednesday evening, there was a heavy security presence across the country as the banks were preparing to receive thousands of euros.

The stock market remained closed Thursday to ensure that it runs smoothly and protects investors. It has also been shut down since Mar. 16.

As part of the 10-billion euro ($13 billlion) international rescue plan, depositors with more than 100,000 euros ($128,000) could lose about 40 percent of their wealth, according to Cyprus Finance Minister Michael Sarris.

“It could be in that neighborhood but I do not want to anticipate it,” said the finance minister in an interview with BBC Radio (via CNBC), adding the exact figure was yet to be decided. “But what I have seen suggests a number in that neighborhood.”

The Associated Press confirmed that the government announced that pensions, Social Security payments and salaries for civil servants will be transferred to bank accounts next Tuesday and Wednesday.

Cyprus becomes the fifth nation in the Eurozone to need billions of dollars in bailout to avoid economic collapse. Greece, Portugal, Ireland and Spain have all needed to be rescued otherwise they would have had to declare bankruptcy.

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