The central bank in Cyprus imposed a €100-a-day withdrawal limit at cash machines for all local banks yesterday to avert a run on lenders.
The island's second largest bank, Cyprus Popular Bank, which had previously limited withdrawals to €260, said the new measure began at 1pm local time and would remain in place until the bank reopens, scheduled for tomorrow, or until confirmation of continued emergency funding from the European Central Bank.
Meanwhile, Cypriot president Nicos Anastasiades, seeking a last-minute reprieve from financial meltdown at talks in Brussels, has a "very difficult task" ahead of him if he is to save the island's economy, a government spokesman said.
With Cyprus facing a deadline today to avert a collapse of its banking system and potential exit from the euro, late-night talks in Nicosia to seal a bailout from the EU and International Monetary Fund broke up without result.
Anastasiades then headed to Brussels in a private jet sent by the EC to hold talks with EU, ECB and IMF leaders ahead of a crunch meeting of euro zone finance ministers.
The president and his team have a "very difficult task to accomplish to save the Cypriot economy and avert a disorderly default if there is no final agreement on a loan accord". the spokesman said.
Underlining the gravity of Cyprus's position, the EU's economic affairs chief, Olli Rehn, said there were now "only hard choices left" for the latest casualty of the eurozone crisis.
French finance minister Pierre Moscovici put it more bluntly: "To all those who say that we are strangling an entire people... Cyprus is a casino economy that was on the brink of bankruptcy," he said.
After negotiations ended in the early hours of yesterday morning in Nicosia, the government issued a statement saying talks were at "a very delicate phase" and deadlines were very tight.
Its tone jarred with earlier expressions of cautious optimism during days of intense negotiations between Cypriot leaders and officials from Troikaof international lenders.
Cyprus's overgrown banking sector has been crippled by exposure to crisis-hit Greece, and the EU says the east Mediterranean island must raise €5.8bn on its own before it can receive a €10bn bailout.