EU to monitor Cyprus capital controls closely

EU to monitor Cyprus capital controls closely
A man tries to look inside a branch of Laiki Bank a few hours before the reopening of the banks on the island in Nicosia on March 28, 2013.

BRUSSELS - The European Commission said Thursday that it will closely monitor capital controls introduced by Cyprus as the newly-bailed out country prepares to re-open its banks after nearly two weeks.

"The Commission will monitor closely with the Cypriot authorities, other member states, the European Central Bank and the European Banking Authority the implementation of the imposed restrictive measures on capital movements," it said in a statement.

"The Commission will insist at all times that any restrictive measures are strictly proportionate to the legitimate objectives of preventing the immediate risk to the financial stability of Cyprus and strictly limited in duration to the time necessary for that purpose," it said.

"While the imposed restrictive measures appear to be necessary in the current circumstances, the free movement of capital should be reinstated as soon as possible in the interests of the Cypriot economy and the European Union's single market as a whole," it added.

Armed security guards were posted at Cyprus banks Thursday ahead of their midday (1000 GMT) reopening after an unprecedented 12-day lockdown but there was no sign of customers queuing early for access to their cash.

Tight restrictions are in place to prevent a run on deposits that could wreak havoc for the island's already fragile economy, with daily withdrawals limited to 300 euros (S$477).

Under a deal agreed in Brussels on Monday, Cyprus must raise 5.8 billion euros to qualify for a 10-billion-euro bailout from the troika of the European Union, European Central Bank and International Monetary Fund.

Depositors with more than 100,000 euros in the top two banks - Bank of Cyprus (BoC) and Laiki or 'Popular Bank' - face losing a large chunk of their money.

Five shipping containers reportedly filled with billions of euros were delivered to the central bank in Nicosia late Wednesday, an AFP photographer said. A helicopter and police cars accompanied the cash convoy.

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