There are indications that large sums flowed out of the two banks just before the first bailout package was signed in the early morning hours of March 16. At the end of January, some 40 percent of all savings held in Cypriot accounts were on the books of those two banks. Since then, however, much of it has been transferred elsewhere, despite orders from the central bank that accounts at the two institutions frozen.
The central bank now stands accused of not doing enough to control the movement of capital. Transfers for humanitarian aid were permitted which, while certainly an acceptable exception, opened a loophole for abuse. Many are also furious that the bank allowed "special payments," the definition of which was never adequately established.
The Cypriot central bank has defended itself by saying that it was impossible to completely prevent all transactions, despite the account freeze. Much of the money was withdrawn from overseas, where Cyprus had no authority. Branches of Cypriot banks in non-euro-zone countries such as Russia and Britain do not answer to the European Central Bank. Their liquidity is controlled by central banks in those countries.
Holders of smaller savings accounts have been unable to access much of their money for almost two weeks, companies have been unable to pay their suppliers and across the country people are concerned that their salaries will not arrive on schedule on the first of the month. Meanwhile, rich businesspeople and those with connections overseas have been able to transfer their money into foreign accounts.
Parliament in Nicosia is suspicious. Lawmakers have demanded that the central bank assemble a list of those customers who withdrew large amounts of money prior to the closure of the country's financial institutions. In particular, parliamentarians want to know if central bank employees or members of the government received early warning and were able to quickly rescue their assets.
But that's not all: holders of smaller accounts should be prepared for the fact that not all bank services will immediately be available. There are growing speculations that Cypriot banks might not be opened on Thursday, as scheduled. They mightwi be operational from April 1st. And those who had more than €100,000 parked at the Bank of Cyprus will likely lose "about 40 percent" of their assets. Bank customers could suffer for much longer and experts say that those with more than €100,000 in their accounts stand to lose up to 90 percent of their deposits.
The parliamentary investigation indicates just how great the mistrust is between lawmakers and the government.
By Guylain Gustave Moke
Photo-Credit: Getty Images