Bank Holidays & Fund Suspensions
Cyprus: National Bank Holiday, 2013
Purpose
To stop bank runs that began on March 16, 2013, following the announcement of a controversial proposal to tax all depositors in Cypriot banks
Key Terms
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Announcement DateMarch 18, 2013
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End DateBank holiday: March 28, 2013; Withdrawal restrictions: March 2014
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Legal AuthorityBank holiday: The Cyprus Bank Holiday Law defined bank holidays and gave the governor of the CBC the power to announce additional bank holidays; Withdrawal restrictions: The Emergency Law of 2013, passed on March 27, governed the capital controls and deposit withdrawal restrictions
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AdministratorThe CBC
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Communication and DisclosureAnnouncements from the president of Cyprus and the Eurogroup regarding a controversial tax on depositors caused bank runs which the holiday was put in place to stop
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Permitted WithdrawalsDuring the holiday: Withdrawals from ATMs were permitted, and electronic transfers were banned; After the holiday: cash withdrawals limited to EUR 300 per depositor per institution; trade transactions above EUR 5,000 needed CBC approval
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Treatment of Depositors or InvestorsAt the end of the bank holiday, all uninsured deposits of more than EUR 100,000 at the two largest banks were frozen and bailed-in; depositors at other banks were subject to restrictions
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OutcomesThe second-largest bank in Cyprus, Laiki Bank, was resolved and the largest bank, BoC, was restructured. Uninsured depositors of Laiki Bank ultimately received 6 cents on the euro; At the BoC, 47.5% of deposits over EUR 100,000 were converted into equity
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Notable FeaturesThe bank holiday lasted until Cypriot authorities came to an agreement with the EU; Capital controls were kept in place for two years
The Greek government debt crisis was especially hard on the two largest Cypriot banks. Bank of Cyprus (BoC) and Laiki Bank lost EUR 1.8 billion and EUR 2.3 billion, respectively, on their Greek government bonds after the European Union (EU) decision in October 2011 to haircut the bonds. Over the next year, Laiki Bank faced severe liquidity problems from depositor withdrawals, the Central Bank of Cyprus (CBC) extended to it significant emergency liquidity assistance, and the government owned 84% of the bank after injecting EUR 1.8 billion. The Cypriot economy also suffered negative effects and in March 2013, authorities negotiated a EUR 10 billion economic adjustment program with the EU, European Central Bank, and International Monetary Fund (together the “troika”) that required authorities to stabilize the two stressed banks without troika funds. Early on Saturday, March 16, the Cypriot government and the Eurogroup, the finance ministers of EU member states using the euro, announced a plan for troika aid that included a one-time tax on all Cypriot bank deposits, although overseas branches of Cypriot banks were excluded. The authorities anticipated depositors would run. While commercial bank branches are closed on Saturdays, the authorities shut down electronic transfers to prevent electronic runs. However, they left ATMs open. After the announcement, depositors emptied ATMs and ran on cooperative banks, which are typically open on Saturdays; the cooperative banks subsequently closed. When the parliament rejected the bank-levy plan on Monday, March 18, a national holiday, the CBC imposed a bank holiday that ultimately lasted 10 days. During the bank holiday, authorities and the troika agreed on a new plan for the banks: Laiki Bank would be resolved, and BoC would be restructured. Uninsured depositors in both banks would take losses. Cyprus put in place capital controls and deposit withdrawal restrictions at the end of the bank holiday to avoid excessive liquidity flight. The capital controls were revised multiple times, cash withdrawal restrictions ended in March 2014, and controls were completely removed in April 2015. Uninsured depositors of the two troubled banks were frozen and ultimately bailed in.
This case study describes the bank holiday in Cyprus in March 2013.
The Greek government debt crisis, which began in 2009, hit Cypriot banks hard. The two largest banks, Bank of Cyprus (BoC) and Laiki Bank, lost EUR 1.8 billion and EUR 2.3 billion (USD 2.4 billion and USD 3.1 billion),FPer Bloomberg EUR 1.00 = USD 1.33 on October 3, 2011. respectively, on their Greek government bonds after the European Union (EU) decision in October 2011 to haircut Greek government bonds. Beginning in October 2011 and lasting until the bank’s resolution in 2013, Laiki Bank received collateralized loans from the European Central Bank (ECB) and emergency liquidity assistance (ELA) from the Central Bank of Cyprus (CBC) to make sure the bank could continue to fund itself as depositors withdrew their funding (CBC 2013i; EC 2012). For more information on the ELA provided to Laiki Bank, see Schaefer-Brown (2025).
In late 2011, in response to the crisis, the European Banking Authority identified a EUR 2 billion capital shortfall at Laiki Bank in a stress test of 71 banks across Europe using numbers from September 2011. Around the same time, under the European Directive on Capital Requirements, the College of Supervisors set Laiki Bank’s shortfall at EUR 3.1 billion. In January 2012, Laiki Bank presented a recovery plan to the CBC that included deleveraging, a voluntary exchange offer to bondholders, and a capital increase of EUR 1.8 billion through private investors. When the bank failed to raise capital from private investors, the government agreed in May 2012 to recapitalize the bank and, in June 2012, became an 84% shareholder (CBC 2011; CBC 2013i; Laiki Bank 2012; Noonan 2013). For more information on the recapitalization of Laiki Bank, see Schaefer-Brown (2024b).
In August, officials from Laiki Bank submitted a restructuring plan to the CBC that would (1) create a “good” bank, separating nonperforming loans into a “bad” bank, and an asset management company; and (2) force losses on senior bondholders while protecting depositors. But the government amended the plan in response to feedback from the troika. The new plan was to put the healthy parts of the bank into a new subsidiary that could be sold once separated from the bank’s Greek branch. But this plan also failed, as depositors continued to pull their funds, partly due to concerns that the government would impose haircuts on depositors (CBC 2013i; Noonan 2013). Over the course of 2012, Laiki Bank lost EUR 2 billion in deposits in its Greek branch and one-third of its domestically raised deposits. These outflows significantly reduced the number of liability holders available to share losses in the bail-in when the bank was ultimately restructured (Dübel 2013; IMF 2014).
In early 2013, ECB authorities estimated that the recapitalization needs of BoC and Laiki Bank were EUR 8 billion, approximately 44% of the GDP of Cyprus. Also in early 2013, the EU and the IMF encouraged the government to downsize the banking sector because it would not be able to afford a recapitalization. In March 2013, the ECB threatened to withdraw its approval of ELA to Laiki Bank, putting further pressure on the government to agree to terms of a bail-out by the troika—the International Monetary Fund (IMF), European Commission (EC), and ECB (CBC 2013i; Draghi 2015).
Throughout this time, Cypriot authorities were in negotiation with the troika for a bailout deal for the government. There would have been precedent for the troika to protect all depositors, since it had done so in other countries and Laiki Bank’s recapitalization needs stemmed from the EU’s decision to haircut Greek government bonds. But the troika made it a condition of its assistance that Cyprus rescue the two banks without official funds, which required Cyprus to impose substantial losses on depositors (ACB 2013; CBC 2013i; Eurogroup 2013b).
On Friday, March 15, 2013, the finance minister of Cyprus agreed to a controversial plan with the Eurogroup, which the Cypriot government and Eurogroup announced early on the morning of March 16; the IMF publicly supported the plan later that day. The deal involved a EUR 10 billion loan to Cyprus; Cyprus would also have to raise EUR 5.8 billion through a one-time tax on all banking sector deposits, including a 9.9% tax on uninsured deposits (deposits above the EUR 100,000 insurance limit) and a 6.75% tax on insured deposits (IMF 2013b; Noonan 2013; O’Brien 2013). Depositors of Greek branches of Cypriot banks would not be subject to the proposed deposit tax (Reuters 2013b). The plan also did not involve the resolution of either bank.
Officials acted quickly on the morning of Saturday, March 16, to close the payment system, anticipating depositor runs in response to the announcement of the deposit tax (Calamur 2013; CBC 2014). The deposit tax would be based on deposits as of Friday, so officials informed the public that any ATM withdrawals would not reduce their levy. Monday, March 18, was a preexisting national bank holiday, Green Monday. Had parliament approved the proposal, the deposit tax would have been deducted prior to banks reopening on Tuesday (CBC 2013b; Demetriades 2017; Kambas 2013a). However, the House of Representatives rejected the depositor tax on March 18. The CBC then announced a bank holiday on March 18, applicable to all banks, through March 20, as officials sought alternatives to the bank-levy plan (Calamur 2013; CBC 2013c; Eurogroup 2013a). On March 20, the CBC announced a two-day extension of the bank holiday through the end of that week. Monday, March 25, was another preexisting national bank holiday, Greek Independence Day; on this day, the CBC made a final announcement extending the bank holiday through March 27 (CBC 2013d; CBC 2013e; CBC 2013f).
During the bank holiday, after the Cypriot House of Representatives rejected the depositor-tax plan, Cyprus reached out to Russia for help. Previously, Russia had loaned Cyprus EUR 2.5 billion, which Cyprus received in three tranches from 2011 to 2012. However, Russia did not provide Cyprus with further funds when asked for help in March 2013 (ESM 2019).
On March 25, 2018, the Eurogroup announced a new EUR 10 billion aid package that imposed losses only on uninsured depositors of the two troubled banks. Laiki Bank would be resolved immediately and split into a good bank and a bad bank. The BoC would take over the good bank. Insured deposits would be protected; uninsured deposits (over EUR 100,000) would be frozen. The government recapitalized the BoC by bailing in its shareholders and bondholders and converting nearly half of its uninsured deposits into equity; BoC depositors received equity in the restructured BoC. As of 2021, the liquidation of Legacy Laiki appeared to still be in progress (ESM 2013; Hazou 2021). For more information on the resolution of Laiki Bank and the restructuring of the BoC, see Schaefer-Brown (2024a).
Also on March 25, the CBC announced that banks would reopen on March 28 (CBC 2013f; CBC 2013g; Eurogroup 2013b). On March 28, when banks reopened, Cyprus implemented capital controls and depositor restrictions. Under the restrictions, cash withdrawals were limited to EUR 300 per depositor per institution and trade transactions above EUR 5,000 required CBC approval. The capital controls were initially implemented for 7 days but were prolonged and revised 11 times in the following months. Cash withdrawal restrictions were lifted in March 2014, but other restrictions remained in effect until April 2015 (CBC 2013a; CBC 2013j; CBC 2014; EC 2013; EC 2014; Gortsos 2021). Figure 1 shows a timeline of key events in this intervention.
There was widespread criticism of the troika’s first proposal, which would have imposed a tax on insured as well as uninsured deposits at all Cypriot banks, treating them differently from other Eurozone depositors. This criticism came from diverse sources such as the UK chancellor, the Russian president, and the Wall Street Journal editorial board. A Financial Times article said that the president decided on the taxes of 9.9% on uninsured depositors and 6.75% on insured depositors because he didn’t want the tax on uninsured depositors to surpass 10%. The CBC implemented the bank holiday on Monday, March 18, to prevent runs when the deal fell through (CBC 2014; EC 2013; O’Brien 2013; Spiegel 2013; Waterfield and Squires 2013; WSJ 2013).
An IMF report from April 29, 2013, stated that implementation of the bank holiday and capital controls was differentiated by transaction type to minimize disruptions to the payments system and ensure the execution of essential transactions (IMF 2013a, 7).
On September 16, 2013, six months after the “epicenter” of the Cypriot crisis, the IMF’s executive director for Cyprus issued a statement saying that social and political tensions appeared to have been fading since March (IMF 2013c, 1). He primarily credits this progress to the assistance provided by the EU-IMF support package, which required the bail-in of uninsured depositors. The statement lists the bank holidays, capital controls, and restrictions on cash withdrawals as the actions the Cypriot government implemented during the epicenter of the crisis to address the two failing banks and stabilize the system (IMF 2013c, 1).
At the time, the Association of Cyprus Banks noted that the troika required, as a condition for aid, that Cyprus impose losses on uninsured depositors in Cyprus, whereas depositors in other countries had been protected by aid by the EU. The Association of Cyprus Banks took issue with the troika’s inconsistent decision in its 2012–2013 annual report: “It is important to point out that the bank recapitalization needs originated after the October 2011 EU political decision to apply a haircut on Greek Government Bonds” (ACB 2013, 22). The same annual report further stated that “the haircut wiped out EUR 4.5 billion from the capital of the three largest Cypriot banks” and that “despite the loss caused by that decision, the troika insisted that the EUR 5.8 billion required for the recapitalization of [Laiki Bank and BoC] would be extracted from private sources (bail-in)” (ACB 2013, 22).
A report from the CBC on March 30, 2013, immediately following the resolution of Laiki Bank, defended the actions of the governor of the central bank in resolving the bank. The report said that given the political decisions of the Eurogroup, the governor “prevented a disorderly bankruptcy of Laiki and consequently the country itself” through his “timely statements and actions” (CBC 2013i).
Around the same time, in an April 15 letter to ECB President Draghi, the president of Cyprus criticized the governor of the CBC, saying that the governor had “failed to regulate” the banking system effectively and that he had permitted Laiki Bank to continue to receive ELA throughout 2012 despite being insolvent (Kambas 2013b). The president highlighted the governor’s decision not to annul the ELA to Laiki Bank and his aim of holding elections in February 2013 as evidence of the governor’s failing to effectively regulate and supervise the banking system. Then, according to the president, the “ECB’s warning that it would pull the plug on ELA to Cyprus’ banks forced Cyprus into accepting “tough rescue terms” (Kambas 2013b). The president also launched a study on what caused the collapse of the Cypriot economy. This study concludes that Laiki Bank was insolvent before the haircut of Greek bonds (NYT 2014).
A CBC presentation in May 2022 highlights issues faced and lessons learned in regard to the Cypriot financial crisis. One issue the presentation highlights is that there was an impact on the real economy and economic activity slowed down. Another issue addressed by the CBC was that the new shareholders of the BoC were “dissatisfied and aggrieved former depositors” who became shareholders by force (CBC 2022, 9–12). Additionally, the bailed-in deposits resulted in defaults on loan repayments, and the situation led to “thousands of court actions against” the CBC, BoC, and the government (CBC 2022, 9–12).
According to sources at the ESM, since the COVID-19 pandemic, Cyprus has made positive developments in terms of financial stability and debt. Cyprus regained investment-grade ratings from all major rating agencies in September 2023, which the country had lost in 2012.
Key Design Decisions
Purpose
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On Friday March 15, 2013, the finance minister of Cyprus and the Eurogroup negotiated a controversial resolution plan for Laiki Bank and BoC as a condition to the troika funding a EUR 10 billion economic adjustment program for Cyprus. Since the program funds could not be used to stabilize the banks, Cyprus proposed raising EUR 5.8 billion through a one-time tax on all banking sector deposits, representing a 9.9% tax on uninsured deposits (deposits above EUR 100,000) and a 6.75% tax on insured deposits (Noonan 2013; O’Brien 2013). At this time the Cypriot banking sector was around 675% of the country’s GDP and the banks didn’t have sufficient bail-in-able debt, meaning neither the Cypriot government nor the banks could have borne the cost of stabilization without bailing in depositors. On March 16, the Eurogroup released a statement on this decision and the following day the president of Cyprus made a televised statement regarding the decision (Calamur 2013; Dübel 2013; Eurogroup 2013a).
Officials acted quickly on the morning of Saturday, March 16, to close the payment system, anticipating depositor runs in response to the announcement of the deposit tax. The deposit tax would be based on deposits as of Friday, so officials informed the public that any ATM withdrawals would not reduce their levy. Monday, March 18, was a preexisting national bank holiday, Green Monday. Had parliament approved the proposal, the deposit tax would have been deducted prior to banks reopening on Tuesday (CBC 2014; Demetriades 2017; Reuters 2013a). On Monday March 18, the House of Representatives declined to approve the plan and the one-time stability tax, creating a vacuum.
To prevent bank runs while the government considered alternatives to the failed deposit-tax plan, the CBC initiated the bank holidays on Monday, March 18 (CBC 2014, 32). The initial announcement did not include a reopening date. The CBC extended the banking holiday multiple times until announcing on March 25 that the banks would reopen on March 28FSources differ in the number of days attributed to the bank holiday, it lasted from March 18 to March 28 (10 days), however March 18 and March 25 were national holidays, so some sources don’t include these days in the length of the holiday, nor the weekend of March 23–24, reporting the length of the holiday as six days. (CBC 2013b; CBC 2013c; CBC 2013d; CBC 2013e; CBC 2013f; CBC 2014; EC 2013). During the bank holiday, Cypriot authorities downsized the Cypriot banking sector through the resolution of Laiki Bank, its second largest bank, the restructuring of the BoC, its largest bank, and the sale of all Cypriot banks operations in Greece to a Greek bank, Piraeus. This process preserved all insured depositors at the two banks. These measures reduced the size of Cyprus’s collective banks by approximately EUR 23.9 billion (147% of GDP) (CBC 2013i; CBC 2013h; EC 2013, 7; Hardouvelis 2016, 247).
Part of a Package
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After the Cypriot House of Representatives decided not to adopt the government’s proposal for the one-off deposit tax agreed with the Eurogroup on March 16, an alternative plan was reached during the bank holiday, on March 25. The new plan called for the resolution of Laiki Bank, the transfer of Laiki Bank’s insured depositors to the BoC, and the bail-in of Laiki Bank and BoC’s uninsured depositors, whose accounts were effectively frozen (EC 2013, 43–44; ESM 2013; IMF 2014, 35).
Following the BoC’s restructuring and recapitalization, the European Stability Mechanism (ESM) reported that the bank was adequately capitalized with a Common Equity Tier 1 capital ratio of 12% (the minimum was 9%). Although the bank holiday was lifted before this report, Cypriot authorities kept capital controls in place for two years, lifting them in April 2015 (ESM 2013; CBC 2014, 32; Kambas 2015; Politico 2015).
When the banks reopened, Cyprus implemented deposit withdrawal restrictions and capital controls to avoid “excessive liquidity outflows” (EC 2013, 43). The objective of these controls was to allow current transactions for goods and services inside and outside the country but limit capital transactions. The CBC and local and state authorities were exempt from these measures. The capital controls were initially implemented for seven days but were prolonged and revised eleven times in the following months, withdrawal restrictions were lifted in March 2014, but other restrictions remained in effect until April 2015 (CBC 2013a; CBC 2013j; CBC 2014; EC 2013).
The initial capital controls and withdrawal restrictions included:
- Cash withdrawals could not exceed EUR 300 daily per person per credit institution (if the maximum amount was not drawn on a given day it could be withdrawn later);
- Cashing checks was prohibited;
- Payments for trade transactions up to EUR 5,000 per day per account were unrestricted, from EUR 5,001 to EUR 200,000 were subject to approval, and beyond EUR 200,001 needed prior authorization;
- Payments or transfers outside of Cyprus could not exceed EUR 5,000 per person per month for each credit institution;
- Cashless payments or transfers of deposits to accounts held abroad or in other credit institutions were prohibited;
- Fixed-term deposits could not be terminated prior to their maturity unless the funds were used to repay a loan within the same credit institution;
- Exports of EUR notes (or foreign currency) could not exceed EUR 1,000 (or its equivalent in foreign currency) per person per journey abroad;
- On the first maturity of fixed-term deposits, EUR 5,000 or 10% of the total capital (whichever is highest) could be transferred to a current account or deposited in a new fixed-term deposit in the name of the depositor in the same credit institution. For the remaining amount the maturity would be extended for a month;
- Payments of salaries, new funds transferred from abroad, withdrawals of cash using cards issued by foreign institutions on accounts abroad, cashing checks issued on accounts held with foreign institutions abroad, and cash withdrawals from accounts of credit institutions with the CBC were exempt from restrictions (CBC 2013a).
Legal Authority
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The Cyprus Bank Holidays Law of 1959 defined bank holidays, identified standing bank holidays, and gave the governor of the CBC the power to declare additional bank holidays. The law gave the governor the right to appoint, by proclamation, any day to be observed as a bank holiday. Any additional bank holidays the governor announces are defined the same way as preexisting bank holidays (Government of Cyprus 1959).
The CBC also had the authority to suspend the operations of Cypriot banks per article 48(3) of the Central Bank of Cyprus Law, 2002. This gave it the authority to temporarily prohibit the placement of payments or transfer of funds and suspend payment systems operations, as it did on March 16, 2013 (Republic of Cyprus 2022).
During the bank holiday, the Cypriot parliament passed the Enforcement of Restrictive Measures on Transactions in Case of Emergency Law of 2013 on March 27. This law gave the Minister of Finance the ability to implement temporary administrative restrictions on financial transactions. The parliament passed other laws endowing the CBC with new powers as the resolution and supervisory authority in Cyprus in ensuring price stability and supporting the general economic policy of the government (CBC 2013a; CBC n.d.; EC 2013; Cyprus 2013).
Administration
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During the bank holiday, the CBC was heavily involved with the banks, coordinating the resolution of Laiki Bank, the restructuring of the BoC, and freezing the uninsured depositors of both banks. The CBC appointed special administrators for Laiki Bank and BoC during the resolution and restructuring. The CBC is also the supervisory authority for Cypriot banking operations (CBC 2013h; CBC n.d.; EC 2013; Noonan 2013).
Governance
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The CBC announced the initial bank holiday on March 18 and the subsequent extensions on March 20 and March 25 (CBC 2013b; CBC 2013c; CBC 2013d; CBC 2013e; CBC 2013f). The March 25 announcement included the reopening date for the banks. The reopening date was decided by the finance minister with the recommendation of the governor of the CBC. The Ministry of Finance also put out an announcement specifying the capital controls that would be in place when the banks reopened (MoF n.d.).
Communication
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On March 16, the Eurogroup released a statement regarding the one-time tax on deposits and the following day the president of Cyprus made a televised statement regarding the decision. In his statement the president said that the decision to tax depositors was made to avoid a disorderly bankruptcy of the country (Calamur 2013; Eurogroup 2013a; Reuters News n.d.). As ATMs emptied following the announcement of this controversial plans, the CBC initiated the bank holiday to prevent further bank runs. The CBC made three announcements extending the bank holiday and at the end of the bank holiday, both the CBC and the Ministry of Finance put out announcements specifying the details of the deposit withdrawal restrictions and capital controls (applicable to all banks) and the details of the resolution of Laiki Bank and restructuring of the BoC that would apply when the banks reopened (CBC 2013b; CBC 2013c; CBC 2013d; CBC 2013e; CBC 2013f; CBC 2014; MoF n.d.).
The announcement regarding Laiki Bank and BoC restructuring clarified that BoC was not being liquidated and that the resolution process applied only to the two banks: “The rest of the Cypriot banking system is not affected by the resolution process nor by the decisions of the Eurogroup” (CBC 2013g). The CBC announcement regarding the capital controls stated with respect to their purpose that “to safeguard the stability of the Cypriot banking system, it was deemed necessary to implement interim restrictive measures, which will gradually be lifted upon assessment of the situation” (CBC 2013a).
Details of Holidays, Suspensions, or Gates
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The bank holiday lasted from March 18 to 28, a 10-day period that included two national bank holidays and a weekend. The Cyprus Bank Holiday Law of 1959 defines bank holidays as nonbusiness days for all Cypriot banks; however, bills of exchange, promissory notes, and other negotiable instruments that are due and payable on the holiday are still payable on the holiday. This definition applies to regular national bank holidays and additional bank holidays announced by the governor of the CBC (Government of Cyprus 1959).
During the bank holiday, banks were closed and business generally halted with the exception of permitted “essential payments” (see Key Design Decision No. 8, Treatment of Depositors or Investors). However, ATMs were operational subject to normal withdrawal limits, except that Laiki Bank imposed a withdrawal limit of EUR 260 per day (EC 2013).
Exiting the bank holiday the CBC kept some restrictions in place:
- Cash withdrawals could not exceed EUR 300 daily per person per credit institution (if the maximum amount was not drawn on a given day it could be withdrawn later);
- Cashing checks was prohibited;
- Fixed-term deposits could not be terminated prior to their maturity unless the funds were used to repay a loan within the same credit institution (CBC 2013a).
Treatment of Depositors or Investors
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Two Cypriot banks had solvency issues going into the bank holiday, Laiki Bank and BoC. After the Cypriot House of Representatives decided not to adopt the government’s proposal for the one-off deposit tax (6.75% on insured deposits and 9.9% on uninsured deposits) agreed with the Eurogroup on March 16, an alternative plan was reached on March 25. Cypriot authorities resolved Laiki Bank and had the BoC absorb the Laiki Bank insured depositors. The BoC was also recapitalized through the bail-in of its uninsured depositors (ESM 2013).
During the holiday all payments and transfers within a banking group and interbank transactions were prohibited, except for “essential payments” (EC 2013, 43). “Essential payments” included systemically relevant payments (meaning a risk of default for the credit institution or further harming financial stability existed if such payment were not to be made), salary payments, payments for food, oil, and tuition fees, and payments by government services for humanitarian reasons (EC 2013, 43). Additional cash withdrawal limits were imposed on Laiki Bank and BoC, but the specific terms of these are not clear.
Research is unclear with respect to the status of ATM operations during the bank holiday. However, three things are certain:
- ATMs were open;
- There were runs on ATMs, which ran out of cash;
- There were limits on withdrawals from ATMs.
According to the EC, ATM withdrawals were normally subject to certain limits agreed with the bank and these applied during the bank holiday. One exception was Laiki Bank, which decided to impose a withdrawal cap of EUR 260 per day. Multiple sources reported other limits on ATM cash withdrawals ranging from EUR 100 to EUR 700 (EC 2013; Hardouvelis 2016; Reuters 2013a; 2013b; WSJ 2013).
Verification of Solvency
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Two Cypriot banks had solvency issues going into the bank holiday. Cyprus resolved one of the banks and had the second bank, the BoC, absorb the insured depositors of the other bank. The BoC was also recapitalized through the bail-in of its uninsured depositors. Following its restructuring and recapitalization the ESM reported the BoC was adequately capitalized with a Common Equity Tier 1 capital ratio of 12% (the minimum was 9%) (ESM 2013).
Other Conditions
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Research has not revealed other conditions that were applicable to all Cypriot banks. However, the CBC appointed special administrators for Laiki Bank and BoC and essentially had complete control over the banks, during the bank holiday and resolution and restructuring. When the Cypriot authorities put Laiki Bank through resolution, all of its directors resigned. As part of the restructuring of the BoC, the CBC removed the board of directors and senior management of the BoC from their posts (CBC 2013h; CBC 2022; Noonan 2013).
Exit Strategy
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Going into 2013, Cypriot authorities were seeking help from the troika due to solvency concerns at its two largest banks. They reached an initial agreement on March 16, which the Eurogroup and the president announced; this agreement was quite controversial and sparked runs on the Cypriot banking system (CBC 2013i; Noonan 2013; O’Brien 2013). To stop the runs the CBC announced a bank holiday for two days. The CBC extended this thrice more, only announcing the reopening of the banks in the third extension after authorities had negotiated with the troika a new stabilization plan for the banks, which secured financing through an economic adjustment program (CBC 2013c; CBC 2013d; CBC 2013e; CBC 2013f). The CBC announced the new arrangement, which did not include the one-time stabilization tax on all deposits, on March 25, the same day it announced the final extension of the bank holiday and the banking system’s reopening on March 28 (CBC 2013f; CBC 2013g; Eurogroup 2013b). The Ministry of Finance and the CBC announced deposit withdrawal restrictions and capital controls when the bank holiday lifted. The capital controls were extended and revised 11 times from March to May of 2013, and some capital controls were still in effect at the end of 2013 (CBC 2013a; CBC 2013j; CBC 2014; MoF n.d.). The government eventually lifted the capital controls in April 2015 (Kambas 2015; Politico 2015).
Regulatory Changes
1
Research has not revealed additional changes to regulation.
Key Program Documents
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(ESM 2013) European Stability Mechanism (ESM). 2013. “Financial Assistance for Cyprus.” FAQs, September 2013.
Frequently asked questions about financial assistance in Cyprus.
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(CBC 2013a) Central Bank of Cyprus (CBC). 2013a. “The Enforcement of Restrictive Measures on Transactions in Case of Emergency Law of 2013 (Unofficial Translation),” March 28, 2013.
CBC press release specifying the capital controls in effect at the end of the bank holiday.
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(CBC n.d.) Central Bank of Cyprus (CBC). n.d. “History.” Accessed November 12, 2024.
CBC webpage on its history.
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(Cyprus 2013) Cyprus. 2013. “The Enforcement of Restrictive Measures on Transactions in Case of Emergency Law of 2013.” March 27, 2013.
Unofficial translation of the bill passed to set in place capital controls upon the exit of the holiday
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(Government of Cyprus 1959) Government of Cyprus. 1959. “Cyprus Bank Holidays Law.” 1959.
Cypriot Bank Holiday Law published in 1959 that defines bank holidays and gives the governor of the CBC the power to appoint additional bank holidays.
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Letter from the IMF.
(IMF 2013a) International Monetary Fund (IMF). 2013a. “Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding.” April 29, 2013.
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(Republic of Cyprus 2022) Republic of Cyprus. 2022. “The Central Bank of Cyprus Law, 2002.” December 2022.
English translation and consolidation of the Republic of Cyprus law defining the role of the central bank.
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(Calamur 2013) Calamur, Krishnadev. 2013. “Cyprus President Tries to Calm Public After Anger Over Bailout Deal.” NPR, March 17, 2013.
NPR article on the president's announcement after the March 16, Eurogroup announcement.
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(Hardouvelis 2016) Hardouvelis, Gikas A. 2016. “Overcoming the Crisis in Cyprus.” In The Cyprus Bail-In, edited by Alexander Michaelides and Athanasios Orphanides, 225–71. London: Imperial College Press.
Chapter from book describing the Cypriot crisis.
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(Hazou 2021) Hazou, Elias. 2021. “Liquidation Filing for Legacy Laiki Took Seven Years.” Cyprus Mail, January 25, 2021.
Article on the liquidation of Legacy Laiki.
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(Kambas 2013a) Kambas, Michele. 2013. “Cypriots Stunned by Forced Savings Cuts.” Reuters, March 16, 2013.
Article on the deposit tax.
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(Kambas 2013b) Kambas, Michele. 2013. “Cyprus Central Bank Failed in Its Job, President Tells ECB.” Reuters, April 16, 2013, sec. Business News.
Article criticizing Cyprus’s central bank.
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(Kambas 2015) Kambas, Michele. 2015. “Cyprus to Lift All Capital Controls on Monday: Prisdent Anastasiades.” Reuters, April 3, 2015.
Article on the end of the capital controls in Cyprus.
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(Noonan 2013) Noonan, Laura. 2013. “Inside Laiki - Countdown to Catastrophe.” Reuters, April 2, 2013.
Article on the resolution of Laiki.
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(O’Brien 2013) O’Brien, Matthew. 2013. “Everything You Need to Know about the Cyprus Bank Disaster.” Atlantic, March 18, 2013.
Article on Cyprus’s tax on depositors.
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(Politico 2015) Politico. 2015. “Cyprus Lifts Capital Controls,” April 7, 2015.
Article on the end of the capital controls in Cyprus.
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(Reuters 2013a) Reuters. 2013a. “Cyprus’ Savers Bear Brunt of Unprecedented Bailout,” March 16, 2013.
Article on the initial EU deal involving the tax on all depositors.
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(Reuters 2013b) Reuters. 2013b. “Greece Seeks Buyers for Local Units of Cypriot Banks,” March 16, 2013.
Article on Greece seeking buyers for parts of Cypriot banks.
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(Reuters News n.d.) Reuters News. n.d. “Cyprus President Says Depositors Had to Pay to Avoid Bankruptcy.”
Article on the Cypriot president’s announcement regarding the tax on depositors.
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(Spiegel 2013) Spiegel, Peter. 2013. “Cyprus Depositors’ Fate Sealed in Berlin.” Financial Times, March 17, 2013.
Article on the initial Cyprus tax.
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(Waterfield and Squires 2013) Waterfield, Bruno, and Nick Squires. 2013. “Cypriots Braced for Harsh Banking Curbs.” Telegraph, March 26, 2013.
Article on the Cypriot bail-in.
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(WSJ 2013) Wall Street Journal (WSJ). 2013. “A Better Cyprus Deal.” March 26, 2013.
Editorial from the Wall Street Journal on the Cyprus deal.
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(CBC 2011) Central Bank of Cyprus (CBC). 2011. “EBA Capital Exercise.” Press release, December 8, 2011.
Announcement from the Central Bank of Cyprus on the EBA capital exercise.
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(CBC 2013b) Central Bank of Cyprus (CBC). 2013b. “Bank Holiday.” March 8, 2013.
CBC announcement of a bank holiday on Monday, March 18.
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(CBC 2013c) Central Bank of Cyprus (CBC). 2013c. “Bank Holidays.” March 18, 2013.
CBC announcement of bank holidays on Tuesday and Wednesday, March 19 and 20, 2013.
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(CBC 2013d) Central Bank of Cyprus (CBC). 2013d. “Bank Holidays.” March 20, 2013.
CBC announcement of bank holidays on Thursday and Friday, March 21 and 22, 2013.
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(CBC 2013e) Central Bank of Cyprus (CBC). 2013e. “Bank Holiday.” March 21, 2013.
CBC announcement of a bank holiday on Monday, March 25.
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(CBC 2013f) Central Bank of Cyprus (CBC). 2013f. “Bank Holiday.” March 25, 2013.
CBC announcement extending the bank holiday until March 27.
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(CBC 2013g) Central Bank of Cyprus (CBC). 2013g. “CBC Announcement.” Press release, March 26, 2013.
CBC announcement on the resolution of Laiki Bank.
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(CBC 2013h) Central Bank of Cyprus (CBC). 2013h. “Clarifications for the Better Understanding of the Resolution Measures Implemented under the Resolution of Credit and Other Institutions Law, 2013.” Press release, March 30, 2013.
CBC announcement clarifying the resolution measures regarding Laiki Bank and Bank of Cyprus.
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(CBC 2013i) Central Bank of Cyprus (CBC). 2013i. “Rescue Programme for Laiki Bank.” Press release, March 30, 2013.
Press release from the Central Bank of Cyprus regarding the rescue of Laiki Bank.
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(CBC 2013j) Central Bank of Cyprus (CBC). 2013j. “Eleventh Decree for Temporary Restrictive Measures on Transactions,” May 14, 2013.
CBC announcement of the eleventh decree revising capital controls.
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(Eurogroup 2013a) Eurogroup. 2013a. “Eurogroup Statement on Cyprus.” Press release, March 16, 2013.
Eurogroup statement on Cyprus.
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(Eurogroup 2013b) Eurogroup. 2013b. “Eurogroup Statement on Cyprus.” Press release, March 25, 2013.
Eurogroup statement on Cyprus.
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(IMF 2013b) International Monetary Fund (IMF). 2013b. “Press Release: IMF Statement on Cyprus at the Eurogroup Meeting.” March 16, 2013.
IMF press release on the Cypriot crisis following the Eurogroup meeting.
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(MoF n.d.) Minister of Finance (MoF). n.d. “Announcement of the Ministry of Finance.”
Announcement from the Ministry of Finance regarding the capital controls input at the end of the bank guarantee (in Greek).
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(ACB 2013) Association of Cyprus Banks (ACB). 2013. Annual Report 2012–2013.
Annual report for 2012–2013 from the Association of Cyprus Banks.
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(CBC 2014) Central Bank of Cyprus (CBC). 2014. Annual Report 2013.
Central Bank of Cyprus annual report for 2013.
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(CBC 2022) Central Bank of Cyprus (CBC). 2022. “Experiences from the Implementation of Bail-In Resolution Measures in Cyprus.” FinSAC Annual International Conference, May 17–18, 2022.
Presentation from the Central Bank of Cyprus on the bail-in of depositors.
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(Draghi 2015) Draghi, Mario. 2015. “Letter to Fabio De Masi and Neoklis Sylikotis.” April 20, 2015.
Letter from European Central Bank President Mario Draghi to members of the European Parliament (translated by the ECB).
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(EC 2012) European Commission (EC). 2012. “State Aid SA.34827 (2012/NN) – Cyprus Rescue Recapitalisation of Cyprus Popular Bank,” September 13, 2012.
European Commission letter on the recapitalization of Cyprus Popular Bank.
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(EC 2013) European Commission (EC). 2013. “The Economic Adjustment Programme for Cyprus.” European Economy: Occasional Papers, no. 149, May 2013.
European Commission paper on the Economic Adjustment Program for Cyprus.
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(EC 2014) European Commission (EC). 2014. “The Economic Adjustment Programme for Cyprus: Fourth Review – Spring 2014.” European Economy: Occasional Papers, no. 197. July 2014.
EC paper on the adjustment program for Cyprus.
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(ESM 2019) European Stability Mechanism (ESM). 2019. “Crisis in Cyprus: ‘No Negotiating Power, No Credibility.’” In Safeguarding the Euro in Times of Crisis: The Inside Story of the ESM. 261–75. Luxembourg: Publications Office of the European Union.
Chapter from an ESM book on the crisis in Cyprus.
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(IMF 2013c) International Monetary Fund (IMF). 2013c. “Cyprus: First Review under the Extended Arrangement under the Extended Fund Facility and Request for Modification of Performance Criteria.” IMF Country Report No. 13/293, September 2013.
Report from the IMF on Cyrpus.
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(IMF 2014) International Monetary Fund (IMF). 2014. “Cross–Border Bank Resolution: Recent Developments.” IMF Policy Paper, June 2014.
2014 Report from the IMF on recent resolutions.
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(Laiki Bank 2012) Laiki Bank Group (Laiki Bank). 2012. Annual Report 2011.
Laiki Bank’s annual report for 2011.
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(NYT 2014) New York Times (NYT). 2014. “Laiki Popular Bank: How a Bank’s Mismanagement Toppled an Economy,” October 2014.
New York Times publication of a leaked study on the Cypriot crisis initiated by former president Nicos Anastasiades.
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(Demetriades 2017) Demetriades, Panicos. 2017. A Diary of the Euro Crisis in Cyprus: Lessons for Bank Recovery and Resolution. Palgrave Macmillan Cham.
Book on the euro crisis by the former governor of the Central Bank of Cyprus.
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(Dübel 2013) Dübel, Hans-Joachim. 2013. “The Capital Structure of Banks and Practice of Bank Restructuring.” Study commissioned by the Center for Financial Studies, University of Frankfurt, October 8, 2013.
Paper presenting bank restructuring case studies.
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(Gortsos 2021) Gortsos, Christos V. 2021. “On the Cypriot Banking Crisis and Banking Resolution of 2013,” May 2021.
Article on the Cypriot banking crisis.
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(Schaefer-Brown 2024a) Schaefer-Brown, Stella. 2024a. “Cyprus: Laiki Bank and Bank of Cyprus Restructuring, 2013.” Journal of Financial Crisis 6, no. 1.
YPFS case study on the restructuring of resolution of Laiki Bank and the restructuring of Bank of Cyprus.
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(Schaefer-Brown 2024b) Schaefer-Brown, Stella. 2024b. “Cyprus: Laiki Bank Capital Injection, 2012.” Journal of Financial Crisis 6, no. 3.
YPFS case study on Laiki Bank’s capital injection in 2012.
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(Schaefer-Brown 2025) Schaefer-Brown, Stella. 2025. “Cyprus: Laiki Bank Ad Hoc Emergency Liquidity, 2011.” Journal of Financial Crisis 7, no. 1.
YPFS case study on the emergency liquidity assistance to Laiki Bank.
Taxonomy
Intervention Categories:
- Bank Holidays & Fund Suspensions
Crises:
- European Soverign Debt Crisis