When Cards and ATM’s are the only choice: A fortnight in Cyprus with no banking system, nor trust

Efthymiou, Leonidas and Michael, Sophia (2013): When Cards and ATM’s are the only choice: A fortnight in Cyprus with no banking system, nor trust.

Abstract

The aim of this article is to offer some insights into the remarkable happenings that occurred in Cyprus during a two-week period (15 March – 28 March 2013) when the country was left with no banking system, subsisting solely on ATMs and cards. At the same time, we aim to provide some new perceptions into the role of ATMs, POSs and credit cards in critical economic situations where a bank run, bank insolvency, or bail-in are likely to happen. We adopt a ‘procedural approach’ and use the sequence of events method towards building up a ‘timeline analysis’. Our discussion suggests that for a number of reasons, the Cypriot bail-in case has breached the confidence of unsecured and secured depositors and investors on a global scale. Also, we suggest that during the preparations of the supposedly unexpected bail-in, which Cypriot MPs firstly rejected and then accepted the Eurogroup and IMF proposal, ATMs, POSs and credit cards have played a pre-arranged role, securing a controlled circulation of money and transactions with restrictions.

• Item Type: MPRA Paper
• Language: English
• Keywords: ATMs, Levy, bank-run, informal economy, cashless society, Cyprus
• Subjects: F - International Economics > F6 - Economic Impacts of Globalization; N - Economic History > N2 - Financial Markets and Institutions; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes

References

British High Commission (22/03/2013). ‘Cyprus is implementing measures to protect its banking sector’. Online at: https://www.gov.uk/government/world-location-news/cyprus-banks (Accessed: 22/03/2013).

Bryman A. and Bell, E (2011) ‘Business research methods’. (3rd Ed.). New York, Oxford University Press

Central Bank of Cyprus (2013) ‘Annual Economic Indicators’. Online at: http://www.centralbank.gov.cy/media/pdf/AnnualEconomicIndicatorsFeb13eng.pdf (Accessed 20/03/2013)

Central Bank of Cyprus (2013) ‘Clarifications for the better understanding of the resolution measures implemented under the Resolution of Credit and Other Institutions Law, 2013 at the Bank of Cyprus and Laiki Bank’. Online at: http://www.centralbank.gov.cy/nqcontent.cfm?a_id=12631&lang=en (Accessed: 07/06/2013).

Central Bank of Cyprus (2013) ‘List of Financial Institutions’. Online at: http://www.centralbank.gov.cy/nqcontent.cfm?a_id=11366 (Accessed, 28/03/2013).

Christou, G. (19/03/2013) ‘Banks will remain closed but ATMs Stocked up’. Cyprus Mail. Online at: http://www.cyprus-mail.com/atm/banks-will-remain-closed-atms-stocked/20130319 (Accessed 19/03/2013).

European Central Bank (2012) ‘Number of branches of Credit Institutions - Number of Credit Institutions and their branches providing cash services - Stock - denominated in Quantity’. Online at: http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=195.BKN.H.CY.A020.Z.ZZZZ.ZZ.S.Q (Accessed: 20/04/2013).

European Commission (2012) ‘Shadow Economy’. Online at: http://ec.europa.eu/europe2020/pdf/themes/06_shadow_economy.pdf (Accessed: 15/04/2013). http://www.economist.com/blogs/economist-explains/2013/04/economist-explains-how-does-bitcoin-work?fsrc=scn/fb/wl/bl/ee/bitcoinwork2. (Accessed: 15/04/2013).

Malaud, A. (2006) ‘Social Revolution or Political Takeover? The Argentine Collapse of 2001 Reassessed’. Online at: http://www.eui.eu/Personal/Researchers/malamud/Popular_impeachment_in_Argentina.pdf.

Matonis, J. (24/03/2013) ‘Cyprus Goes Cashless the Hard Way’. Forbes. Online at: http://www.forbes.com/fdc/welcome_mjx.shtml. (Accessed: 24/03/2013).

Ministry of Finance (18/03/2013) ‘Announcement Agreement for a Financial Assistance to the Republic of Cyprus’. Online at: http://www.mof.gov.cy/mof/mof.nsf/All/BB670607715A44D6C2257B3200368FE9/$file/agreemenfinancialassistance.pdf (Accessed 18/03/2013).

Monetary and Financial Statistics (March 2013) ‘Total Deposits of non-MFIs held with MFIs’. Nicosia, Statistics Department, Central Bank of Cyprus. Online at: http://www.centralbank.gov.cy/nqcontent.cfm?a_id=9837

Monetary and Financial Statistics (March 2013) ‘Total Deposits of non-MFIs held with MFIs’. Nicosia, Statistics Department, Central Bank of Cyprus. Online at: http://www.centralbank.gov.cy/nqcontent.cfm?a_id=9837 (20/03/2013).

Murphy, R. (2009) ‘Closing the European Tax Gap’. Norfolk, Tax Research LLP Pashardes, P. and Polycarpou, A. (2008) ‘Income Tax Evasion, Inequality and Poverty’. Cyprus Economic Policy Review. Vol. 2, No. 2, pp. 37-49.

Peston, R. (16/03/2013) ‘Shock in Cyprus as savers face bailout levy’. BBC. Online at: http://www.bbc.co.uk/news/world-europe-21814325 (16/03/2013).

Powers, D. ‘The Banking Crisis of 1933: Seattle’s Survival during the Great Depression Bank Closures’. Online at: http://depts.washington.edu/depress/bank_crisis_1933.shtml.

The Economist (07/04/2013) ‘The Economist explains: What is a Bail-in?’ Online at: http://www.economist.com/blogs/economist-explains/2013/04/economist-explains-2.

The Economist (11/04/2013) ‘How does Bitcoin work?’ Online at:

The Guardian (16/03/2013) Cyprus Eurozone bailout prompts anger as savers hand over possible 10% levy. Online at: http://www.guardian.co.uk/world/2013/mar/16/cyprus-eurozone-bailout-anger (16/03/2013).

The Guardian (28/03/2013) ‘Cyprus: lessons from a small disaster’. Online at: http://www.guardian.co.uk/commentisfree/2013/mar/28/cyprus-lessons-disaster-editorial (accessed 28/03/2013).