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

China May Be Biggest Winner From Ukraine Crisis

Missile sales, oil and gas shipments are among many areas that may drive Beijing and Moscow closer together in coming years More

Obama Faces Chaotic World, Limits of Power

Current foreign policy issues bring into focus challenges for US policymakers who are mindful of Americans' waning appetite for overseas military engagements More

SADC Meeting Lesotho Officials to Resolve Stalemate

Official says regional bloc has been engaged with leaders in Lesotho to resolve political disagreement that led to coup attempt More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
West Africa Ebola Vaccine Trials Possible by Early 2015i
X
Carol Pearson
August 30, 2014 7:14 PM
A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.
Video

Video Ukraine Battles Pro-Russia Rebel Assault

After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Growing Business Offers Paint with a Twist of Wine

Two New Orleans area women started a small business seven years ago with one thing in mind: to help their neighbors relieve the stress of coping with a hurricane's aftermath. Today their business, which pairs painting and a little bit of wine, has become one of the fastest growing franchises across the U.S. VOA’s June Soh met the entrepreneurs at their newest franchise location in the Washington suburbs.
Video

Video Ebola Vaccine Trials To Begin Next Week

The National Institutes of Health says it is launching early stage trials of a vaccine to prevent the Ebola virus, which has infected or killed thousands of people across West Africa. The World Health Organization says Ebola could infect more than 20,000 people across the region by the time the outbreak is over. The epidemic has health experts and governments scrambling to prevent more people from becoming infected. Zlatica Hoke has more.
Video

Video Asian Bacteria Threatens Florida Orange Trees

Florida's citrus fruit industry is facing a serious threat from a bacteria carried by the Asian insect called psyllid. The widespread infestation again highlights the danger of transferring non-native species to American soil. VOA’s George Putic reports.
Video

Video Aging Will Reduce Economic Growth Worldwide in Coming Decades

The world is getting older, fast. And as more people retire each year, fewer working-age people will be there to replace them. Bond rating agency Moody’s says that will lead to a decline in household savings; reducing global investments - which in turn, will lead to slower economic growth around the world. But experts say it’s not too late to mitigate the economic impact of the world’s aging populations. Mil Arcega has more.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.

AppleAndroid