by Tyler Durden
March 27, 2013

from ZeroHedge Website

 

 

On Monday we reported the very disturbing news that despite the ongoing liquidity blockade, capital controls and (somewhat) closed Cyprus banks, one particular group of people - the very same group targeted to prompt this whole ludicrous collapse of the island nation - Russian Oligarchs had found ways to bypass the ring-fence and pull their money out quickly and quietly.

 

We said that, if confirmed,

"If we were Cypriots at this point we would be angry. Very, very angry."

Turns out the Cypriots did become angry, and the questions are finally starting.

 

As Spiegel reports, the Cypriot Parliament, which may or may not last too long once the banks reopen tomorrow and the people realize that in a fractional reserve banking system, those deposits you thought were there... they are gone, poof, has begun investigating the capital flight that may means the destruction of Cyprus has been for nothing.

 

Sadly, it is now too little, too late.

 

From Spiegel:

Banks have been closed and accounts frozen in Cyprus recently.

Nevertheless, large amounts were moved out of the country's

crippled financial institutions on the eve of the bailout package.

Lawmakers are suspicious and are investigating both

the government and the Cypriot central bank.

 

Panicos Demetriades looked dead tired as he opened the press conference on Tuesday afternoon on the fourth floor of the Central Bank of Cyprus.

 

The questions and answers flew back and forth for 90 minutes, with Finance Minister Michalis Sarris doing his best to back up the central bank head. Outside, the mountains slowly receded from view behind into a haze, while inside journalists became increasingly restive.

 

When the session ended, many were left wondering why Demetriades had invited them in the first place. He had virtually nothing new to say.

 

Many interpreted the press conference as a symbolic exercise.

 

Central bank head Demetriades, they felt, sought to stage a show of strength to counter the pressure that has been heaped on his shoulders in recent days. For one, he announced earlier this week, without consulting the Cypriot government first, that small banks in the country would open their doors again on Tuesday, in contrast to the island-nation's two largest financial institutions Laiki and Bank of Cyprus.

 

The result was a massive protest from the smaller banks and a reversal. The banks stayed closed. For the moment, the opening date is set for Thursday (March 28, 2013), and many fear that a flood of angry customers could overwhelm the sector.

 

Then, on Monday, the central bank announced that it was installing financial manager Dinos Christofides as a special consultant to the Bank of Cyprus as it prepares to take on assets from Laiki, which is to be liquidated.

 

The deployment of Christofides is legitimate, but it triggered widespread concerns that the Bank of Cyprus too may soon be broken up. Demetriades was accused of not doing enough to explain the steps he was taking, thus intensifying investor anxiety.

 

Most of all, though, the central bank head has been harshly criticized due to the suspicious capital flight from Laiki and the Bank of Cyprus, the two institutions that have been hit hardest by the Cypriot banking crisis.

 

There are indications that large sums flowed out of the two banks just before the first bailout package was signed in the early morning hours of March 16. At the end of January, some 40 percent of all savings held in Cypriot accounts were on the books of those two banks.

 

Since then, however, much of it has been transferred elsewhere, despite orders from the central bank that accounts at the two institutions be frozen.

 

 

'Special Payments'

The central bank now stands accused of not doing enough to control the movement of capital.

 

Transfers for humanitarian aid were permitted which, while certainly an acceptable exception, opened a loophole for abuse. Many are also furious that the bank allowed "special payments," the definition of which was never adequately established.

 

The Cypriot central bank has defended itself by saying that it was impossible to completely prevent all transactions, despite the account freeze. Much of the money was withdrawn from overseas, where Cyprus had no authority. Branches of Cypriot banks in non-Euro-Zone countries such as Russia and Britain do not answer to the European Central Bank. Their liquidity is controlled by central banks in those countries.

 

Such a defense is nothing less than a voluntary admission of impotence.

 

Holders of smaller savings accounts have been unable to access much of their money for almost two weeks, companies have been unable to pay their suppliers and across the country people are concerned that their salaries will not arrive on schedule on the first of the month.

 

Meanwhile, rich businesspeople and those with connections overseas have been able to transfer their money into foreign accounts.

In other words, the Cypriots are, indeed, getting very angry.

 

And soon, they may just have a list of people on whom to take it out:

Lawmakers have demanded that the central bank assemble a list of those customers who withdrew large amounts of money prior to the closure of the country's financial institutions.

 

In particular, parliamentarians want to know if central bank employees or members of the government received early warning and were able to quickly rescue their assets.

 

According to the Greek television station Mega Channel, the list has already found its way into the hands of Parliament President Yannakis Omirou. No one in parliament or in the central bank could be reached for comment on Tuesday evening.

 

Still, the parliamentary investigation indicates just how great the mistrust is between lawmakers and the government - and how acute the doubts are as to Panicos Demetriades' competence.

Only now is Panicos' competence being questioned? Well better late then never.

 

Perhaps, a better question is how much longer will the rule of law remain in Cyprus once full blown class warfare is unleashed, and the 99% are generously handed the list of the 1% who were "informed" enough to pull their money from the flaming sovereign equivalent of Bernie Madoff, while every other uninsured depositor is facing losses of up to 80%, and soon 100%?

 

And what happens if the realization dawns that despite all the promises even insured investors will eventually get impaired once the money runs out?