Cyprus is trying to regain its erstwhile glory.

20.05.2013

The Cyprus government continues to issue decrees, which are aimed to rebuild the country and the banking system after the recent events. Having analyzed the active legislative activity, makes it possible to identify the most significant measures, taken by the leadership of the country in an attempt to return Cyprus its glory.

1. May 17, 2013. The Government of Cyprus adopted a twelve decree about the temporary execution of the restrictive measures in regard to the banking operations.

This decree clearly defines that any new funds transferred to banks in Cyprus after 26 March, 2013 are not a subject to any restrictive measures, which means that present and new companies can fully operate through the Cypriot banks.

More over, the decree allows to transfer the deposit funds to accounts in other credit organizations in Cyprus at a rate up to 15,000 euros per month for of one individual. Such a measure is provided for a legal entity, but the limit of the amounts is raised to 75,000 euros per month.

Full text of the decree: http://www.centralbank.gov.cy/media/pdf/TwelvethDecreeRM_EN_170513.pdf

2. Also, on May 17 the third decree concerning restrictive measures in respect of transactions with foreign banks has been amended. These measures will be effective only for 7 days from the date of the amendment.

The change consists of the fact that the list of banks, on which the restrictive measures will be applied, has been expanded. Now this list consists of:

1. Bank of Beirut SAL

2. Banque BEMO SAL

3. Banque SBA

4. Barclays Bank PLC

5. BBAC SAL

6. BLOM Bank SAL

7. Credit Libanais SAL

8. Jordan Ahli Bank plc

9. Lebanon and Gulf Bank SAL

10. OJSC Promsvyazbank

11. Privatbank Commercial Bank

12. Russian Commercial Bank (Cyprus) Ltd.

Full text of the decree: http://www.centralbank.gov.cy/media/pdf/ThirdDecreeFgnBanks_EN_170513.pdf

3. Also, from the Cypriot media it became aware, that the final "cut" of deposits, that exceed 100,000 euros, was held last week, as expected, in accordance with previously agreed restrictive measures. (http://hbcomp.ru/about/news_and_mailings/news_jurisdictions/3653/).

However, any official information has not been received from the bank itself, so everyone expects that such a bank would send a message to each affected customer.

Expert’s opinion

The actions of Cyprus can be understood, but they really fit into the meaning of the proverb: «There is no use locking the stable door, after the horse has bolted».

Cyprus has mastered the technology of sterilization of excessive money supply.

Government`s actions to remove the restrictions on the movement of funds, generate some waves of proposals to "return the money, stuck in Cyprus" for 15-50% of the refund.

But the problem of unfunded money is left and it is becoming worse. Every month the world financial system owns 85000000000 USD. And these funds are not provided.

Interest rates are falling. The authorities cling to an outdated financial paradigm, they invest a lot of money and hope it will revive the demand and production. But it doesn`t work.

The EU authorities, realizing this, prepare a global "cut" of all of the deposits, which are more than 100.000 evro.

Cyprus has left its last ace in hole and it can use it his way: tax incentives and low-tax status for Cypriot companies. Let the money from Cypriot companies be kept in banks in other countries, but if taxes are low, users of tax schemes return to Cyprus. 

Yaroslav Lomakin ( Managing partner of “Honest&Bright” company)