20 March 2015

There is mounting evidence of the difficulties faced by people working for companies restricted to a EUR 200 a day maximum payout from their FBME Cyprus accounts. This EUR 200 level has been in place for corporate as well as individual depositors since the beginning of March in a draconian measure enacted by the Administrator of the Central Bank of Cyprus. It was previously EUR 1,000 a day.

Reports are coming in of companies struggling to pay their staff on time, even though there is enough money in their accounts. As a result, there is a knock-on effect on their employees meeting their own obligations. Clearly, this is contrary to the terms of the Protection of Wages Law of 2007.

There are further difficulties being faced by corporate clients in meeting payments for electricity, rent, internet connection and other services. And to show how the ‘law of unintended consequences’ affects the Republic itself, there is an impact too on payments to Inland Revenue, Social Services and the Special Contribution Fund for higher wage earners.

Put in context, the daily payout level was cut to EUR 200 from EUR 1,000 on 3 March. Before that, the Administrator chopped and changed between different levels, the highest of which was EUR 10,000 a day. It was never made clear at the beginning why there had to be a daily limit, nor what the reason was for depositors to have to come to Cyprus to present themselves in person to get hold of their cheques. Latterly, in December 2014, an excuse surfaced that the Administrator was seeking to hold a substantial sum in reserve for deposit protection insurance, even though the relevant Cyprus law says that such insurance cannot be paid from the branch’s own funds.

Currently, the CBC holds EUR 156 million- worth of FBME deposits. As a mathematical aside, it may be worthy of note that at the EUR 200 a day level there will be a total need for over 750,000 signed cheques to written out – surely there are not enough cheques in the whole of the Republic! We believe that the CBC never intended ordinary people in Cyprus and depositors in FBME to be so adversely affected by the work of its Resolution Authority.

The one person who is not affected by the EUR 200 a day limit, though, is the Administrator himself, who pays himself from FBME’s coffers slightly more than twice the daily amount that he allows to the Bank’s customers.