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CYPRUS: ABOLISHMENT OF DOMESTIC CAPITAL CONTROLS

The 13th Decree for domestic banks, with effect as from 2 June 2014, lifts all restrictions, which were in place for opening new bank accounts.

With this most recent development, the last domestic capital control introduced by the Eurogroup last year, has been lifted by the Cyprus government. This action shows Cyprus is on track with the roadmap issued in August 2013, pointing out that all capital controls will be lifted by the end of 2014.

The latest decree relating with foreign banks remained almost unchanged, thus allowing them to continue serving their clients without any significant restrictions.

Cyprus’ economic adjustment program

Previous month, officials of the International Monetary Fund, European Commission and European Central Bank gave their positive feedback on Cyprus’ economic program after their 4th review since last year. They confirmed that Cyprus remains on track with fiscal performance and targets being met even better than expected.

At the same time, legislation changes are in line with the structural reform agenda.

The review and approval will be undertaken by the EU, the Executive Board of the IMF, the Eurogroup and the ESM Board of Directors by early July. Their approval will open the way for the disbursement of €600 million by the ESM which is currently expected in the first half of July, and about €86 million by the IMF.

Following this 4th review, a number of measures were agreed between the international lenders and the Cypriot authorities, including the following:

  • Necessary amendments to the legal framework will be introduced to improve the enforcement of the requirement that corporate financial statements are prepared and filed on a regular and timely basis.
  • The legal framework in relation to foreclosures and forced sales of mortgaged property will be amended and adopted by the end of this month, except for primary residences whereby the provisions will enter into force by the end of 2014. The new framework will allow for private auctions to be conducted by mortgage creditors without interference from government agencies.

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