The chief executive of the troubled Bank of Cyprus, the country’s biggest lender, was sacked by the central bank yesterday, just a day before the bailed-out island’s banks were due to reopen.
The firing of Yiannis Kypri was reportedly ordered by international lenders and deepened the crisis in Cyprus, as authorities said they were finalizing controls aimed at preventing a run on the banks.
The Central Bank of Cyprus said “indications are” the banks would reopen with restrictions today, but there was no definitive announcement on a closure that has already lasted 12 days and crippled the Mediterranean island.
Photo: Bloomberg
The main opposition party on the Mediterranean island was also due to hold a major rally, following protests by thousands of bank workers and students on Tuesday against the 10 billion euro (US$12.8 billion) EU-IMF rescue package.
The deal sealed in Brussels on Monday calls for the reform of Cyprus’s prized but bloated banking sector, delivers a major hit to big depositors including many Russians, and threatens Cypriots with years of austerity.
State media said under-fire Central Bank of Cyprus Governor Panicos Demetriades forced out Bank of Cyprus chief Kypri, 62, on the instructions of the “troika” of the EU, the European Central Bank (ECB) and the IMF.
His sacking was part of the restructuring of the Bank of Cyprus under the bailout deal, which involves it absorbing the remains of Laiki, the second-biggest bank in Cyprus that has been wound down, Cyprus News Agency said.
Demetriades, whose own handling of the crisis has come under scrutiny, said on Tuesday that authorities were making “superhuman” efforts to get shuttered banks ready to open today as promised.
Hundreds of Bank of Cyprus workers protested outside the central bank on Tuesday to call for the governor’s resignation, despite efforts by Kypri to calm their fears about their jobs.
Officials were expected later yesterday to announce measures to stop Cypriots draining their accounts and the so-called “haircuts” that major depositors in Bank of Cyprus and Laiki will face.
With Cypriot homes and businesses running short of cash, central bank spokeswoman Aliki Sylianou told the state broadcaster that “indications are that banks will open tomorrow with some restrictions.”
“The restrictions will be limited to allow the flow of capital as much as possible, but we also need to protect the financial system,” Sylianou said.
Cypriot Finance Minister Michalis Sarris told the Financial Times newspaper that the capital controls would be imposed for a seven-day period and then reevaluated, and that they would be “very differentiated” according to various banks.
He separately told state TV that uninsured savers at Laiki faced losses of up to 80 percent on deposits of more than 100,000 euros.
Savers in Bank of Cyprus have already been warned they stand to lose 40 percent of their savings of more than 100,000 euros.
Many Cypriots feel their country was unfairly treated compared with other euro nations that have been bailed out, such as Greece and Spain.
Comments by Eurogroup chief of finance ministers Jeroen Dijsselbloem on Monday which were interpreted as suggesting actions in Cyprus could act as a template for future bailouts also continued to cause worries.
Luxembourg said it was “concerned” about the remarks what it fears is a new eurozone position that oversized finance sectors must be scaled back in line with national economic output following the Cyprus debacle.
London announced that British pensions would no longer be paid into the Cypriot bank accounts of expatriates.
The communist Akel party has announced that it would stage a major demonstration against the rescue package at 6pm yesterday outside the presidential palace.
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