Stocked with cash flown in from elsewhere in Europe, in preparation for what was expected to be a day of heavy withdrawals by depositors, Cypriot banks were described in media reports as having been mobbed when they opened at noon.
Some market observers suggested that the relative smoothness with which the banks reopened was behind a rise in share prices in Europe and the US, which in turn saw the S&P 500 index edge above its previous closing high.
Although there was plenty of anger over what many felt was a crisis forced on Cyprus and its citizens by the European Union, there were no signs of panic, the media reports said.
Hours before the banks reopened, two other small EU countries – Luxembourg and Malta – issued statements proclaiming their lack of similarity to Cyprus. The decision to do so was seen has having been prompted by a growing consciousness in some circles of the high ratio of assets held in their financial institutions, relative to the countries’ respective gross domestic products.
In the case of Luxembourg, the EU’s smallest state, such assets were more than 22 times GDP at the end of last year, according to European Central Bank data.
In it statement, carried on its official website, the Luxembourg government expressed "concern" about such statements and others that it said seek to make “comparisons between the business model of international financial sectors in the euro area”.
Luxembourg’s own financial sector business model is “quintessentially an international one within the euro area”, acting as an important gateway for the euro area by attracting investments, and thus contributing to the general competitiveness of all [EU] member states,” the statement continues.
“Its diversified customer base, sophisticated product services, efficient supervisory mechanism, and rigorous respect and implementation of international standards add to its uniqueness.”
Malta’s statement on the same subject came from Josef Bonnici, governor of the country’s Central Bank. He also said that it would be misleading to compare his EU-member island nation, located in the Mediterranean Sea, with Cyprus, another EU-member island nation located in the same sea – even though both have financial sectors roughly eight times the size of their respective GDPs.
“The problems facing Cypriot banks include losses made on their holdings of Greek bonds, whereas Maltese domestic banks have limited exposure to securities issued by [such eurozone bailout] programme countries,” Bonnici said, in an emailed statement.
Cyprus’s problems are the result of the poor state of its banks, and Europe’s efforts to resolve this by forcing it to accept a €10bn rescue package that its government is financing by raiding the accounts of depositors with more than €100,000 in Cypriot banks. As part of the deal, Laiki bank, the island’s second-largest lender, is being shut down, and bank of Cyprus, the island’s largest bank, is being restructured.
