The next morning they woke up to a different reality.

It turned out that their banking system was totally broke. After suffering enormous losses, banks no longer had sufficient liquidity or capital to maintain customer account balances.

People realized immediately that just because you can log in to a bank's website and see an account balance printed on the screen that doesn't actually mean that the money is there.

To make matters worse for depositors, the government was insolvent and unable to lift a finger to support the banks.

Plus the deposit guarantee from Cyprus's central bank wasn't worth the paper it was printed on.

So in order to save the banking system, Cypriot politicians resorted to the unthinkable– freezing every bank account in the country. It all happened overnight.