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From Sunday to Tuesday, eight million euro were withdrawn from deposits in Cypriot banks mainly from ATMs. Over 17,000 transactions from 230 ATMs were made, for which there was a 50,000-euro ceiling on withdrawals per account.

After the refusal of the Cypriot government to cut the deposits of citizens in order to save the banks, the future of the financial system in the country remains uncertain. Bank branches in the country remain closed everywhere. They are expected to reopen to customers only after the government and the lenders from Europe and the International Monetary Fund reach a new agreement on the type of rescue programme that the parliament and the general public will approve.
 
Meanwhile, Alpha Bank has raised its offer for the purchase of the Greek branches of the three Cypriot banks (Cyprus Bank, Laiki Bank and Hellenic Bank). Piraeus Bank has resorted to the same tactics as reported by Naftemporiki. The fate of two of the three largest banks in Cyprus, Cyprus Bank and Laiki Bank, remains uncertain if Nicosia does not provide rescue funds for the financial system. The cut of deposits in favour of the bank recapitalization should have brought 5.8 billion euro.

The Athens Stock Exchange has suspended the trading of the shares of Cyprus Bank and Cyprus Popular Bank to save them from complete collapse. The main stock index was rapidly going down on Tuesday and ended with a negative result of -3.85%. The stock exchange index for the banking sector suffered a complete collapse and ended at its lowest levels since 1987. Despite the stock exchange collapse, Greece’s Minister of Finance Yiannis Stournaras has stressed again that the deposits in the country are absolutely guaranteed, including the ones in the branches of Cypriot banks.

Currently, Nicosia is trying to show Brussels, by seeking help from Russia, that it has a backup plan. President of the republic Nikos Anastasiadis had a telephone conversation yesterday evening with Vladimir Putin to discuss the cooperation opportunities during the economic crisis. Finance Minister Michael Sarris has been in Moscow since Tuesday evening and according to the Greek media, members of the management board of Laiki Bank have also left for Moscow to negotiate a possible involvement of the Big Brother in saving the financial institution.

One of the scenarios under consideration at present is the consolidation of the two major Cypriot banks and their subsequent division into a "good" and a "bad" part. The project provides for a distinction between the banks’ guaranteed deposits and healthy assets and unguaranteed deposits and bad loans. The unhealthy part of the banks will sell assets to cover the unguaranteed deposits. In this case, the depositors may lose part of their deposits but the European Central Bank will commit itself to continue the funding of Cypriot banks, thus saving the situation.

After the announcement of the plan to cut the deposits, the credit rating agency Fitch has placed the ratings of Cypriot banks on rating watch negative, tending to reduce them. The next step in the credit assessment of Cyprus is expected to be a restricted default. JP Morgan assesses that Cypriot banks will remain closed until the weekend. Nicosia’s refusal to accept the decision of Eurogroup, in combination with the discord in the talks between Greece and the supervisory Troika, and the anarchy in Italy’s government, will lead to a new crisis in the European Union as believed by financial analysts. PIMCO stresses that the conditions offered for the rescue of Cyprus show that Europe has taken a very difficult road.