The Cyprus finance ministry suggests savers holding less than EUR 20,000 would be exempt from a bank levy which has caused much alarm. The plan was changed following outrage that ordinary savers would be forced to pay a levy of 6.75 per cent. The new plan would keep that levy on deposits over EUR 20,000, with those over EUR 100,000 charged at 9.9 per cent. The controversial tax is a condition for Cyprus to get a EUR 10 bln loan from the EU and IMF, to rescue its banks.President Nicos Anastasiades has urged all parties to back the bailout, saying Cyprus will be bankrupt if the deal does not go ahead.
The Cyprus central bank chief, Panicos Demetriades, has warned that scrapping the tax on small savers would scupper the plan to raise EUR 5.8 bln in total from bank deposits. He also predicted account holders could suddenly withdraw 10 per cent or more of the total in Cypriot banks if the levy was imposed. At the same time, Demetriades said he favoured imposing the levy only on accounts above 100,000.
Christine Lagarde, managing director of the International Monetary Fund, said in a speech in Frankfurt that the IMF was ‘‘extremely supportive of the Cypriot authorities’ intentions to introduce more progressive rates in the one-off tax.’’ Lagarde urged Cyprus to meet its commitments under the EUR 10 bln deal sealed with eurozone partners at the weekend, according to theaustralian.com.au.Cyprus’ banks were badly exposed to Greece, which has itself been the recipient of two huge bailouts. Also, a very important aspect is that Chancellor Angela Merkel stressed in a phone call with the Cyprus president Monday that his country hold talks only with international creditors on its bailout deal, a government spokeswoman said, globalpost.com informs.
“The chancellor once again emphasised that the negotiations are to be conducted only with the Troika,” she added, referring to the term used for the European Union, the European Central Bank and the International Monetary Fund. Cyprus Finance Minister Michalis Sarris was heading to Moscow on Tuesday amid an explosion of anger in Russia at a EU bailout deal for the island that could see Russian investors lose billions of euros. Local media said that the main aim of the visit was to discuss a EUR 2.5-bln loan that Moscow extended to Nicosia in 2011 at a rate of 4.5 per cent. About a third of all deposits in Cypriot banks are believed to be held by Russians. Fitch Ratings on Tuesday placed three Cypriot banks on rating watch negative to reflect “downside rating risks arising from the deliberations to impose losses onto the banks’ depositors.”, according to marketwatch.com. The banks affected by Fitch’s negative watch are Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank PCL CY:HB +1.21% .
Markets fragile as investors await Cyprus vote
Financial markets were tense Tuesday as investors awaited a vote in Cyprus on a contentious plan to help fund the country’s bailout by raiding bank deposits, usnews.com reports. On Monday, trading was extremely choppy, particularly in Europe, as investors fretted over an agreement between cash-strapped Cyprus and international lenders to seize deposits in the country’s banks. A vote on the seizures has been scheduled for later Tuesday, though it could be delayed again if the government does not secure the necessary support.In Europe, the FTSE 100 index of leading British shares was down 0.2 per cent at 6,442 while Germany’s DAX fell 0.5 per cent to 7,969. The CAC-40 in France was 0.6 percent lower at 3,802.
The euro steadied after falling Monday to its lowest level against the dollar in 2013. It was trading flat at USD 1.2947. Oil prices were largely unchanged too with the benchmark New York rate down 9 cents at USD 93.65 a barrel.
Isarescu: The impact of the Cyprus decision must be well managed
The impact of some decisions upon cash flows, which results from the recent decision regarding the banking system of Cyprus, must be well managed, the governor of the National Bank of Romania (BNR), Mugur Isarescu said during the launching conference of the Romanian-language edition of the latest report of the Club of Rome.In a different move, Banca Transilvania informed the public about the working hours of the BT units in Cyprus.
The units operated by Banca Transilvania in Cyprus – the Cyprus Branch and the Limassol Agency – will be closed today, March 20, as the Central Bank of Cyprus declared it as non-working day.