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Cyprus bank chief sacking deepens chaos

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Published : 2013-03-27 20:58
Updated : 2013-03-27 20:58

The chief executive of the troubled Bank of Cyprus, the country's biggest lender, was sacked by the central bank Wednesday just a day before the bailed-out island's banks were finally 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 said "indications are" the banks would reopen with restrictions on Thursday, but there was no definitive announcement on a closure that has already lasted 12 days and crippled the Mediterranean island.

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 ($13-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.

The euro hit a four-month low against the US dollar on concerns about fallout from the agreement, which Cyprus officials have said was needed to avert bankruptcy and a "catastrophic" exit from the euro.

State media said under-fire Central Bank Governor Panicos Demetriades forced out Bank of Cyprus chief Kypri, 62, on the instructions of the "troika" of the European Union, European Central Bank and International Monetary Fund.

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 on Thursday 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 London-educated Kypri to calm their fears about their jobs.

Officials were expected later Wednesday 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, Cyprus 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."

Finance Minister Michalis Sarris told the Financial Times newspaper that the capital controls will be imposed for a seven-day period and then reevaluated, and that they will be "very differentiated" according to various banks.

He separately told state TV that uninsured savers at the country's second biggest bank, Laiki or Popular bank, faced losses of up to 80 percent on deposits over 100,000 euros.

Savers in Bank of Cyprus have already been warned they stand to lose 40 percent of their savings over 100,000 euros.

Many Cypriots feel their country was unfairly treated compared to 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.

The European single currency fell under $1.28 for the first time since November on Wednesday due to uncertainty over Cyprus.

London meanwhile announced that British pensions will 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 6:00 pm (1600 GMT) on Wednesday outside the presidential palace.

Akel's Demetris Christofias was president for five years until conservative Nikos Anastasiades was elected last month, and it was he who first sought a bailout in June.

He has been widely criticized for balking at tough terms proposed by the troika and also for holding the reins too loosely on the banking system. (AFP)



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