MOSCOW, March 17 (RIA Novosti) – The Central Bank of Cyprus has ordered all national banks to suspend operations at both domestic and foreign offices, a Cypriot news website reported on Sunday.
Cypriot website 24h said it has obtained a confidential Central Bank letter calling on Cypriot banks on Saturday to stop all form of payments from their accounts, even those that were from one account at the bank to another.
The measure, which Cypriot media said is a “blow to the country's banking system,” comes after EU finance ministers agreed on Saturday to tax deposits in Cyprus as part of the extraordinary 10 billion-euro ($13 billion) bailout.
Under the terms of the bailout deal, Cyprus will have to impose a levy of 6.75 percent on deposits of less than 100,000 euros and 9.9 percent on deposits with greater amounts. Cypriots reacted with shock and rushed to cash machines to withdraw their savings, but many machines refused to pay out.
The bailout plan has yet to be approved by Cyprus’ parliament, with the vote on the bank deposit levy scheduled for Tuesday.
Cypriot President Nicos Anastasiades said he had to choose between the "catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis". He said those who keep deposits in Cypriot banks for two years will get half of the value of the levy in securitized gas revenues.
Cyprus’s debt crisis puts at risk Russian businesses, which have strong financial ties with Cyprus, Moody's credit-rating agency said on Wednesday. The report said Russian banks working with the Russian companies registered in Cyprus, might lose billions of dollars should the island's government default on its debt obligations.
Updated on March 18 adding the fifth paragraph (about parliament approval).