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February 28, 2021

Cyprus: Banks could remain shut to avoid mass withdrawals

Russian President Vladimir Putin called the proposed tax on bank deposits in Cyprus that could hit Moscow oligarchs especially hard “unfair, unprofessional and dangerous.”

A crucial vote in Cyprus’ parliament on a bailout that has sparked huge public anger has been delayed until Tuesday. President Nicos Anastasiades has been meeting MPs in Nicosia and has indicated he wants the terms amended, BBC informs. The EUR 10 bln bailout agreed with the EU and IMF had demanded that all bank customers pay a one-off levy and led to heavy cash withdrawals. The president’s party has 20 seats in the 56-member assembly and needs other parties’ support to ratify the deal. Meanwhile, Russian President Vladimir Putin on Monday called the proposed levy “unfair, unprofessional and dangerous”, his spokesman said. Prime Minister Dmitry Medvedev also said: “It looks simply like the confiscation of other people’s money.” Russian banks and businesses have significant deposits in Cyprus. An EU source told there could be a three-way split on the level of levy, grouped into accounts holding less than 100,000 euros, between 100,000 and 500,000 and more than 500,000. Joerg Asmussen, a member of the European Central Bank’s governing council, said there could be a change to the deal. He said: “It’s the Cyprus government’s adjustment programme. If Cyprus’ president wants to change something regarding the levy on bank deposits, that’s in his hands.  The banks were closed on Monday for a national holiday and could remain shut on Tuesday to avoid mass withdrawals. Opposition leader George Lillikas, an independent, said the president had “betrayed the people’s vote”.The Moody’s ratings agency estimates that, at the end of 2012, Russian banks had placed USD 12 bln in Cypriot banks, with corporate deposits at USD 19 bln. So Russian corporate and individual investors could lose up to USD 2 bln. The Russian government also gave Cyprus a EUR 2.5 bln loan in 2011. Russian Finance Minister Anton Siluanov told the Interfax news agency on Monday that Moscow would consider extending the loan period and restructuring the repayments. Press reports in Cyprus said Gazprom, the state gas monopoly, had offered to provide Cyprus with loans in exchange for gas exploration licences around the island. A Gazprom spokesman, Sergei Kupriyanov, denied the reports, guardian.co.uk informs. If the levy goes ahead, it will affect many non-Cypriots with bank accounts, including UK expatriates. However, depositors in the overseas arms of Cypriot banks will not be hit. Bank of Cyprus UK and Laiki Bank UK both confirmed on their websites that there would be no impact. Chancellor George Osborne said the UK would compensate any government employees and military personnel whose bank accounts were affected.

RON, slightly affected by Cyprus turmoil:  4.41 RON/EUR

The National Bank of Romania (BNR) posted an exchange rate of 4.4170 RON/EUR, a maximum for the last 10 weeks, following by the pessimism of investors induced by the tax on bank deposits which Cyprus must enforce in order to be granted financial aid by the eurozone, Mediafax informs. Against the American currency, the exchange rate increased by 4.52 ban (RON 0.0452) to 3.4088 RON/USD, the highest level since December 14. At that date, the exchange rate was 3.4205 RON/USD. The reference exchange rate of the Swiss franc soared from 3.5677 to 3.6160 RON/CHF. In his turn, Rasvan Radu, CEO of UniCredit Tiriac Bank said in a press conference that the influences for the Romanian bank market will not be significant. “Of course, there are Romanian customers that operate through accounts in Cyprus and will be affected, but I would not comment more than that. I don’t think we speak of a precedent (meaning to enforce a tax on deposits in the European Union) and this was also affirmed by the comments of European commissary Olli Rehn, who said that this is a particular situation, treated of a particular manner, which cannot be considered a precedent. I am firmly convinced that it does not represent a precedent,” Radu said.

Romanian millionaires affected

The list of Romanian millionaires affected by the tax on bank deposits to be enforced by Cyprus includes Ion Tiriac, Puiu Popoviciu, Florin Pogonaru and Radu Georgescu of Gecad. Moreover, 40,000 Romanians will be hit by the unprecedented decision of the EU, the toughest measure ever taken during the financial crisis. According to data provided by the Ministry of Foreign Affairs, the community of Romanian expatriates in Cyprus includes some 40,000 people.

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