News / Europe

    Russia Tries to Ease Concerns Over Cyprus Bank Levy

    Closed cooperative bank shop in Cyprus,  Mar. 16, 2013Closed cooperative bank shop in Cyprus, Mar. 16, 2013
    x
    Closed cooperative bank shop in Cyprus,  Mar. 16, 2013
    Closed cooperative bank shop in Cyprus, Mar. 16, 2013
    Reuters
    Russian officials said on Tuesday a proposed levy on Cypriot bank accounts would not threaten the stability of Russia's banking system and might even have a silver lining.

    President Vladimir Putin on Monday led fierce Russian criticism of the levy, agreed under a European Union bailout, because Russian banks, individuals and companies hold billions of euros in accounts on the eastern Mediterranean island.

    But officials toned down the criticism on Tuesday and tried to ease concerns about Russia's exposure, although they made clear Moscow had not been consulted about the levy.

    "It won't affect the stability of the Russian banking system,'' Alexey Simanovsky, first deputy chairman of the central bank, was quoted as saying by Prime news agency.

    A senior member of the government said the levy, if approved by the Cypriot parliament, could even prove beneficial by making Russia's investment climate look more stable.

    "It is a good chance for the Russian banking system to fight for new depositors, new clients. And demonstrate that our banking system is stable,'' First Deputy Prime Minister Igor Shuvalov told reporters in the central Russian city of Kazan.

    "For Russia, in the mid-term perspective, this [opens] good opportunities ... Russia will gain more than it will lose. For Russia this is a chance to demonstrate its more predictable rules [for] treating investors.''

    Later on Tuesday, Cypriot lawmakers overwhelmingly rejected the deeply unpopular tax on bank deposits, throwing into doubt the bailout deal for Cyprus needed to avert default and a banking collapse.

    Cyprus is a favored offshore center for Russian big business, thanks to its low taxes and light regulation. It ranks as the largest source of foreign direct investment into Russia - money that is largely Russian in origin.

    In the first three quarters of 2012, direct investments from Russia to Cyprus reached $16.1 billion, Russian central bank data showed.

    The Russian banking system's capital adequacy ratio - a liquidity cushion essential to absorb possible shocks - stood at 13.6 percent as of Feb. 1, above the 10 percent minimum required by the central bank.

    Taking the Hit

    Russian banks had $30 to $40 billion tied up in cross-border loans to Cypriot firms at the end of 2012 and some $12 billion on deposit with Cypriot banks, Moody's rating agency said.

    Some of Russia's largest banks have credit exposure to Cyprus which, like Russia, is predominantly an Orthodox Christian country.

    VTB, Russia's second-largest bank by assets, had $13.8 billion in assets and $374 million through its Cypriot subsidiary, Russian Commercial Bank, at the end of 2011, according to Moody's.

    Other big banks such as Sberbank, Alfa Bank, Gazprombank or Nomos said they either have no banking deposits in Cyprus or see an insignificant impact on their operations if the tax is applied.

    Shuvalov said it would be premature to give any estimates on the possible losses Russia could suffer because of the levy, saying they ranged ``from minimal to astronomical.''

    Putin called the proposed levy "unfair, unprofessional and dangerous'' on Monday, expressing the overall mood across the Russian banking society.

    But he also has something to gain indirectly if Russians take their money out of Cyprus because he has been trying to reduce capital flight.

    Central bank chairman Sergei Ignatyev said last month the equivalent of about 2.5 percent of national income was illegally siphoned abroad last year.

    The timing of the EU bailout at the weekend was, however, not a surprise for some in Russia who managed to withdraw funds before agreement on it was reached at the weekend.

    "We saw problems with the Cyprus economy for quite a long period of time and took preventive measures - we terminated operations in this jurisdiction as much as we could,'' said Ekaterina Trofimova, first vice president of Gazprombank.

    According to Thomas Keane, co-founder of Cyprus-based law firm Keane Vgenopoulou & Associates LLC, Russian depositors took about two billion euros out of Cyprus in the 10 days before the EU bailout was announced.

    Gazprombank's Trofimova said that even if the levy was not implemented, the image of Cyprus was already harmed.

    "Russian money will be leaving Cyprus,'' she said, adding that other countries in Europe and Asia now looked attractive.

    Russian central bank data show that in the first three quarters of 2012, Russian direct investments to Latvia stood at $182 million. That was still tiny compared to Cyprus but more than twice as much as in 2007 and much more than for Azerbaijan or Armenia, other former Soviet republics with which Moscow has closer ties.

    You May Like

    Escalation of Media Crackdown in Turkey Heightens Concerns

    Critics see 'a new dark age' as arrests of journalists, closures of media outlets by Erdogan government mount

    Russia Boasts of Troop Buildup on Flank, Draws Flak

    Russian military moves counter to efforts to de-escalate tensions, State Department says

    Video Iraqis Primed to March on Mosul, Foreign Minister Says

    Iraqi FM Ibrahim al-Jaafari tells VOA the campaign will meet optimistic expectations, even though US officials remain cautious

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Immigrant Delegate Marvels at Democratic Processi
    X
    Katherine Gypson
    July 27, 2016 6:21 PM
    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video Immigrant Delegate Marvels at Democratic Process

    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video A Life of Fighting Back: Hillary Clinton Shatters Glass Ceiling

    Hillary Clinton made history Thursday, overcoming personal and political setbacks to become the first woman to win the presidential nomination of a major U.S. political party. If she wins in November, she will go from “first lady” to U.S. Senator from New York, to Secretary of State, to “Madam President.” Polls show Clinton is both beloved and despised. White House Correspondent Cindy Saine takes a look at the life of the woman both supporters and detractors agree is a fighter for the ages.
    Video

    Video Dutch Entrepreneurs Turn Rainwater Into Beer

    June has been recorded as one of the wettest months in more than a century in many parts of Europe. To a group of entrepreneurs in Amsterdam the rain came as a blessing, as they used the extra water to brew beer. Serginho Roosblad has more to the story.
    Video

    Video First Time Delegate’s First Day Frustrations

    With thousands of people filling the streets of Philadelphia, Pennsylvania for the 2016 Democratic National Convention, VOA’s Kane Farabaugh narrowed in on one delegate as she made her first trip to a national party convention. It was a day that was anything but routine for this United States military veteran.
    Video

    Video Commerce Thrives on US-Mexico Border

    At the Democratic Convention in Philadelphia this week, the party’s presumptive presidential nominee, Hillary Clinton, is expected to attack proposals made by her opponent, Republican presidential nominee Donald Trump, to build a wall along the U.S.-Mexico border. Last Friday, President Barack Obama hosted his Mexican counterpart, President Enrique Peña Nieto, to underscore the good relations between the two countries. VOA’s Greg Flakus reports from Tucson.
    Video

    Video Film Helps Save Ethiopian Children Thought to be Cursed

    'Omo Child' looks at effort of African man to stop killings of ‘mingi’ children
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video Recycling Lifeline for Lebanon’s Last Glassblowers

    In a small Lebanese coastal town, one family is preserving a craft that stretches back millennia. The art of glass blowing was developed by Phoenicians in the region, and the Khalifehs say they are the only ones keeping the skill alive in Lebanon. But despite teaming up with an eco-entrepreneur and receiving an unexpected boost from the country’s recent trash crisis the future remains uncertain. John Owens reports from Sarafand.
    Video

    Video Migrants Continue to Risk Lives Crossing US Border from Mexico

    In his speech Thursday before the Republican National Convention, the party’s presidential candidate, Donald Trump, reiterated his proposal to build a wall along the U.S.-Mexico border if elected. Polls show a large percentage of Americans support better control of the nation's southwestern border, but as VOA’s Greg Flakus reports from the border town of Nogales in the Mexican state of Sonora, the situation faced by people trying to cross the border is already daunting.
    Video

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video Calm the Waters: US Doubles Down Diplomatic Efforts in ASEAN Meetings

    The United States is redoubling diplomatic efforts and looking to upcoming regional meetings to calm the waters after an international tribunal invalidated the legal basis of Beijing's extensive claims in the South China Sea. VOA State Department correspondent Nike Ching has the story.
    Video

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.

    Special Report

    Adrift The Invisible African Diaspora