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Cypriot deposits ahead of banking crisis reveal capital flight

FXstreet.com (Barcelona) - Amidst the anticipated reopening of banks across the beleaguered country of Cyprus, myriad households and companies had withdrawn as much as €1.0 billion from their bank accounts in Cyprus last month, according to data estimates compiled by the European Central Bank on Thursday.

Indeed, the volume fluctuations of private deposits held on bank accounts in Cyprus declined by -2.1% MoM to €46.4 billion in February, after already notching a decline of -2.0% the previous month, the ECB data highlighted. These figures, which notably do not include deposits held by the Cyprus government or interbank deposits, appear to reflect mounting concerns amongst the island's savers whilst bailout negotiations were still ongoing between the capitol and its constituent international lenders.

As such, the ECB compiles similar data each month for every Eurozone country. By comparison, in Greece, deposits increased by nearly +2.0% in February, whereas in Italy by +1.3% and in Spain by +0.1%. Cyprus banks opened again Thursday following an unprecedented 12-day lockdown aimed at preventing a run on the banks that could wreak havoc on the island's already tepid economy, with daily withdrawals limited to the sum of €300 euros.

Under a deal agreed in Brussels on Monday, Cyprus must raise an estimated €5.8 billion to qualify for a €10.0 billion bailout from the troika of the European Union, European Central Bank and International Monetary Fund. Consequently, depositors with more than €100,000 in the top two banks, i.e. Bank of Cyprus (BoC) and Laiki or 'Popular Bank', face the potential to lose a sizable portion of their assets.

According to Analysts at BBH, “There have been further deposit outflows in Cyprus during March before the bank holiday was declared – this too may not be a case of conspiratorial intrigue. The election was the last hurdle to some deal. However, there does seem to be some capital leakage during the bank holiday, which ended today.”

Forex Flash: Cyprus banks reopen but EUR continues to look vulnerable – UBS

All commercial banks in Cyprus opened their doors today – in many cases after the first time in 12 days. An official from the Central Bank of Cyprus has already announced some measures intended to restrict transactional activities. According to Research Analyst Gareth Berry at UBS, “These are not likely to prevent a bank run, but should at least slow the pace of deposit withdrawals.”
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