Business to benefit as Cyprus further eases limits on money transfers domestically and abroad

NICOSIA, Cyprus – Cyprus significantly eased restrictions on money transfers inside and outside the country Thursday to help businesses spur a deeply slumping economy.

The Finance Ministry said that it raised the limit on business payments and money transfers abroad that require documentation — but not cumbersome scrutiny and approval from ministry and Central Bank officials — from €20,000 ($26,160) to €500,000 ($654,000) euros.

Businesses also can now freely make domestic payments or transfers up to 300,000 euros for goods and services. Anything above that amount needs documentation, but not specific approval from officials as before.

The limit on the amount that individuals can transfer from one bank to another was raised from 3,000 to 10,000 euros per month. The limit on such transfers by individuals outside the country was raised from 2,000 to 5,000 euros, while a 5,000 euro monthly cap on credit and debit card spending abroad is lifted.

The amount of cash people can take with them while travelling abroad was raised from 2,000 to 3,000 euros. But a daily 300-euro withdrawal limit for individuals and a ban on cashing checks remain in place.

Cyprus introduced the restrictions last month — the first that any country has imposed in the eurozone’s 14-year history — to prevent a run on its banks as part of a 23 billion euro ($30 billion) bailout deal with international creditors that forced savers with over 100,000 euros in deposits in the country’s two biggest banks to take heavy losses.

Officials said the restrictions will remain in place until confidence in the banks is restored.

Cypriot lawmakers have already approved many of the austerity measures that were mandated by the creditors — the European Commission, the European Central Bank and the International Monetary Fund.

They include cuts to government salaries, tax increases and breaking up the country’s second largest lender Laiki — which was hard hit by its exposure to bad Greek debt — into a “good” bank that will be folded into the larger Bank of Cyprus and a “bad” bank that will be wound down.

Cyprus’ Parliamentary Speaker Yiannakis Omirou said Thursday that lawmakers will begin debate on the bailout agreement on April 30 ahead of a vote on it.

Meanwhile, the Finance Ministry issued a decree outlining the obligations of foreign bank subsidiaries operating in Cyprus while the capital controls are in place.

According to the decree, a parent bank must promise in writing to support its subsidiary’s financial health so that it won’t have to ask for money either from the Central Bank or the EU.

Subsidiaries must have liquid assets on hand of at least 60 per cent relative to deposits, while they must provide a list to the Cyprus Central Bank of all international customers.

Also Thursday, the Cyprus Central Bank said that the Romanian operations of the Bank of Cyprus will resume April 26 after being suspended for more than three weeks.

The suspension was enacted because of an initial plan to sell the Romanian operations as part of country’s bank restructuring move. But Central Bank spokeswoman Aliki Stylianou said that plan has been amended and Bank of Cyprus in Romania will reopen, although with greatly reduced assets.

That’s because all of the bank’s retail client savings, cash, loans as well as some corporate deposits in Romania will be transferred to the Laiki’s operations in the country, which will eventually be sold off.