Banks on the island nation of Cyprus reopened today after being closed for some two weeks. As part of the European Union bailout plan, the Cypriot Parliament passed some heavy restrictions on banking to prevent a chaotic run on the banks. Most customers will only be able to withdraw 300 Euros per day from their savings accounts. No check cashing is allowed and use of credit cards outside Cyprus is limited to 5,000 Euros per month. This is part of the European Commission requirements allowing for the European Central Bank and the International Monetary Fund to bailout the tiny country. The two largest banks, the Bank of Cyprus and the Cyprus Popular Bank, also known as Laiki, have tougher limits, allowing only withdrawals of 100 Euros per day. They will also be forced to merge as the Bank of Cyprus, as both financial institutions were the worst hit by the Greek bond debacle of last year.

cyprus banks

As part of the bailout agreement, savings accounts in Cypriot banks of more than 100,000 Euros will be subject to a one-time tax of up to 40%. Electronic transfers to banks outside of Cyprus of more than 200,000 Euros will be reviewed by officials. Citizens may only take 1,000 Euros with them when leaving the country.

Already, many in other troubled EuroZone nations are worried about similar courses of actions. Spain, Italy and Portugal could see some heavy withdrawals with money fleeing to safer climes. Banks in the UK are keeping extra cash on hand in case there is a run on money there. Cyprus was hit hard when last year′s deal on Greek bonds essentially made them worthless. Cypriot banks had been a tax haven for much foreign money, mostly from Russia, before the present crisis began. Now, the watch has begun for where this latest economic contagion will strike next.