All Cypriot banks to stay closed untill Thursday

Changing an earlier directive, Cyprus Central Banks instructed early Tuesday all banks to stay closed for two more days until Thursday. There was no immediate explanation for the change of plans. Under the first directive, all banks except Bank of Cyprus and Cyprus Popular Bank would open on Tuesday after an extended eight-day bank holiday. The instruction was criticized by economists, most notably former Cyprus president George Vasiliou who said it would be damaging the banking system and the economy. All banks, including about 26 foreign banks and cooperative credit societies will reopen on Thursday. President Nicos Anastasiades said in a televised address on Monday that the Central Bank will impose limit on bank transactions to avoid a run on deposits. When the banks reopen, Cyprus Popular Bank, known as Laiki, will cease to exist as such. It will be split into a good bank and a bad bank, with the good portion folded into Bank of Cyprus. The good Laiki will take with it deposits under 100,000 euros and other assets and also a 9.2 billion euro debt resulting from European Central Bank emergency liquidity assistance. The bad part of Popular Bank will ultimately be liquidated with bond and equity holders and large depositors taking the loss. Merging the two banks and the resumption of the operation of the banking system on Thursday will be the first test for the Cypriot government in implementing Eurogroup conditions for a 10 billion euro bailout. Anastasiades said in his speech the European Central Bank had informed the Central Bank it will safeguard adequate liquidity for the banking system.