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banking crisis
The Russian government has announced it will not compensate its citizens who have lost money in the Cyprus banking crisis.
Russian citizens are believed to have billions of euros in Cypriot accounts and deposits above 100,000 euros ($128,200) in the two biggest banks (Bank of Cyprus and Laiki) could be reduced by as much as 60%.
The Russian government has announced it will not compensate its citizens who have lost money in the Cyprus banking crisis
Such losses would be “a great shame”, First Deputy PM Igor Shuvalov said, “but the Russian government won’t take any action in that situation”.
Cyprus now restricts cash withdrawals.
A 10 billion-euro bailout from the EU and IMF – required to keep the debt-laden Cypriot economy afloat – will only be granted if Cyprus itself raises 5.8 billion euros, most of which looks likely to come from depositors with more than 100,000 euros in Bank of Cyprus and Laiki (Popular Bank).
Laiki, the second largest bank, is being wound up and folded into Bank of Cyprus, the biggest bank.
Speaking on the Russian state TV channel Rossiya 1, Igor Shuvalov said Russian money in Cyprus included some that had been taxed and some that had not.
The Russian government would still look at cases where there were “serious losses, involving companies in which the Russian state is a shareholder”, he said. That review would take place in Russia, and “for this it would certainly not be necessary to help the Republic of Cyprus”, Igor Shuvalov added.
Many of the large-scale foreign investors in Cyprus are Russian – and in many cases they have taken advantage of the island’s status as an offshore tax haven. Some politicians have accused Cyprus of acting as a hub for Russian money-laundering – an allegation rejected by Cypriot officials.
After years of large-scale capital flight from Russia there is now a Kremlin drive to repatriate Russian money. The government has introduced tighter monitoring of foreign bank accounts held by Russian state employees.
Bank of Cyprus depositors with more than 100,000 euros could lose up to 60% of their savings as part of the bailout, officials say.
Cyprus’ central bank says 37.5% of holdings over 100,000 euros will become shares.
Up to 22.5% will go into a fund attracting no interest and may be subject to further write-offs.
The other 40% will attract interest – but this will not be paid unless the bank performs well.
The fear is that once the unprecedented capital controls – which are in place for an indefinite time – are lifted, the wealthiest will rush to move their deposits abroad.
Cyprus has become the first eurozone member country to bring in capital controls to prevent a torrent of money leaving the island and credit institutions collapsing.
President Nicos Anastasiades has said the financial situation has been “contained” following the deal.
The president has also stressed that Cyprus has no intention of leaving the euro, stressing that “in no way will we experiment with the future of our country”.
Yiannis Kypri, chief executive of Bank of Cyprus, the biggest bank in the country, has been ousted by the central bank, state media has said.
Yiannis Kypri was forced out by central bank governor Panicos Demetriades, who has himself come under fire for his handling of Cypurs’ banking crisis.
Yiannis Kypri’s removal came on the orders of Cyprus’ bailout lenders, the Cyprus News Agency reported.
The authorities are struggling to reopen the country’s banks on Thursday.
Yiannis Kypri, chief executive of Bank of Cyprus, the biggest bank in the country, has been ousted by the central bank
Bank of Cyprus is to be restructured and merged with parts of the failed number two lender, Laiki Bank.
The reasons for Yiannis Kypri’s sudden removal were not immediately clear.
The bank’s chairman Andreas Artemis handed in his resignation on Tuesday, but local reports suggested that the troubled bank’s board had rejected his resignation.
Panicos Demetriades, the central bank governor, was widely criticized on Tuesday for suggesting that Bank of Cyprus was going to be wound up in the same way as is planned for Laiki Bank. The apparently erroneous statement led to demonstrations and calls for his resignation from Bank of Cyprus staff.
On Tuesday, Panicos Demetriades said that “superhuman” efforts were being made to ready the banks for reopening.
They have been shut for more than a week as a controversial bailout was negotiated, which will see many depositors take losses.
“We have to restore the public’s trust in banks,” he said.
Meanwhile, Cyprus is planning to impose a weekly limit on cash withdrawals, among other restrictions on money transfers, even following the banks’ reopening.
The country’s draft capital controls include export limits on euros and a ban on cashing cheques.
In addition, fixed-term deposits will have to be held until maturity.
The restrictions are expected to be tighter for accounts at Bank of Cyprus and Laiki Bank.
Panicos Demetriades has confirmed that “temporary” capital controls will be imposed on the island, without giving details.
Banks have not been open since March 15. Their reopening had been expected after Cyprus agreed a deal with the IMF and the EU that releases 10 billion euros in support.
The Cypriot authorities had previously said all that but the biggest two banks would open on Tuesday, march 26, but they have remained shut while the finer details of capital controls are handled by the Cypriot central bank.
Cyprus parliament has approved a “national solidarity fund” to ease the banking crisis, which has hit confidence across the eurozone.
MPs also imposed capital controls to prevent a run on the island’s troubled banks.
These are the first of a series of laws intended to raise the 5.8 billion euros ($7.5 billion) Cyprus needs to qualify for a 10 billion-euro bailout.
MPs are still to decide whether to impose a levy on large bank deposits.
The fund would allow the pooling of state assets for an emergency bond issue, reports the Reuters news agency.
Parliament on Tuesday rejected a levy on all deposits to raise the money.
Before the series of much-delayed votes in an emergency session of parliament, the European Union, Germany and leading bankers all urged MPs to speedily pass the reforms.
Cyprus parliament has approved a “national solidarity fund” to ease the banking crisis
The European Central Bank has given Cyprus until Monday to find a solution, or it says it will stop transferring money to its undercapitalized banks.
The EU has postponed next week’s summit to discuss free trade with Japan, so European leaders can concentrate on trying to solve the Cyprus crisis.
Banks on the island have been closed since Monday and many businesses are only taking payment in cash.
There were protests outside parliament on Friday.
Before the parliamentary session began, government spokesman Christos Stylianides said the authorities were engaged in “hard negotiations with the troika”, referring to the EU, the European Central Bank and the International Monetary Fund, the AFP news agency reports.
German Chancellor Angela Merkel warned Cyprus not to “exhaust the patience of its eurozone partners”, reports say.
Trading in shares in Bankia, Spain’s fourth-largest bank, has been suspended in Madrid.
Bankia asked them to be suspended ahead of a board meeting this afternoon to reformulate its accounts for 2011 and submit a plan to shore up its finances.
The bank is reported to be due to ask the government for a bailout of more than 15 billion Euros ($19 billion).
Bankia, which is Spain’s fourth-largest bank, was part-nationalized two weeks ago because of its problems with bad property debt.
Bankia, which is Spain's fourth-largest bank, was part-nationalized two weeks ago because of its problems with bad property debt
Any extra government money would be on top of the 4.5 billion Euros in state loans that the government converted into shares in the group in the part-nationalization process.
Shares in Bankia’s parent company Banco Financiero y de Ahorros (BFA) have also been suspended.
Bankia had to reassure its savers last week that their money was safe after a Spanish newspaper reported a run on the bank.
Bankia was created in 2010 from the merger of seven struggling regional savings banks. It holds 32 billion Euros in distressed property assets.
Spain’s economy minister Luis de Guindos said on Wednesday that the government would pump at least 9 billion Euros into Bankia but that more would be available if it was needed.
There have been four attempts by Spanish governments to shore up the banking system since the global banking crisis of 2008.
As part of the latest plan, lenders are having to make 30 billion Euros of extra provisions to cover potential losses on property loans, which comes on top of 54 billion Euros they were ordered to set aside in February.
The health of Spain’s banking system is key to whether the country eventually needs to seek a bailout itself from the eurozone and the International Monetary Fund.
But Professor Santiago Carbo Valverde of the University of Grenada, said he thinks Spain’s other large banks are not in as difficult a situation as Bankia.
“Bankia has huge exposure to real estate and bad loans, much larger than other banks.
“Other banks may have trouble as the government is demanding more capital, but I don’t think we will have another big case like Bankia.
“The three largest ones are in better shape as they have lower exposure to bad loans and they are more internationally diversified.”
Spain’s credit rating was downgraded by Standard & Poor’s last month on the basis that it would probably have to take on more debt to support its banks.
Its shares fell 7.4% on Thursday to close at 1.57 Euros, which is 58% down from their listing price in July 2011.
Bankia history
• Formed in December 2010 from merger of seven troubled banks
• Most toxic assets moved into holding company BFA
• Listed on the Madrid stock exchange in July 2011
• Chairman Rodrigo Rato resigned earlier in the month before Bankia was part-nationalized
