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

IS Militants Release 49 Turkish Hostages

Turkey's state-run Anadolu news agency reports that no ransom was paid and no conditions accepted for the hostages' release; few details of the release are known More

Photogallery IS Attacks Send Thousands of Syrian Kurds Fleeing to Turkey

Syrian Observatory for Human Rights says more than 300 Kurdish fighters crossed into Syria from Turkey to defend a Kurdish area from attack by the Islamic militants More

Video Sierra Leone's Ebola Lockdown Continues

Thousands of health workers are going door to door in the West African country of 6 million, informing people of how to avoid Ebola, handing out soap More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Fears Ebola Outbreak ‘Beyond Our Capability to Contain’i
X
Jeff Seldin
September 20, 2014 10:28 PM
Each day brings with it new warnings about the deadly Ebola outbreak already blamed for killing more than 2,600 people across West Africa. And while countries and international organizations like the United Nations are starting to come through on promises of help for those most affected, the unprecedented speed with which the virus has spread is raising questions about the international response. VOA's Jeff Seldin has more from Washington.
Video

Video Fears Ebola Outbreak ‘Beyond Our Capability to Contain’

Each day brings with it new warnings about the deadly Ebola outbreak already blamed for killing more than 2,600 people across West Africa. And while countries and international organizations like the United Nations are starting to come through on promises of help for those most affected, the unprecedented speed with which the virus has spread is raising questions about the international response. VOA's Jeff Seldin has more from Washington.
Video

Video Iran, World Powers Seek Progress in Nuclear Talks

Iran and the five permanent members of the U.N. Security Council plus Germany, known as the P5 + 1, have started a new round of talks on Iran's nuclear program. VOA State Department correspondent Pam Dockins reports that as the negotiations take place in New York, a U.S. envoy is questioning Iran's commitment to peaceful nuclear activity.
Video

Video Obama Goes to UN With Islamic State, Ebola on Agenda

President Obama goes to the United Nations General Assembly to rally nations to support a coalition against Islamic State militants in Iraq and Syria. He also will look for nations to back his plan to fight the Ebola virus in West Africa. As VOA White House correspondent Luis Ramirez reports, Obama’s efforts reflect new moves by the U.S. administration to take a leading role in addressing world crises.
Video

Video Migrants Caught in No-Man's Land Called Calais

The deaths of hundreds of migrants in the Mediterranean this week has only recast the spotlight on the perils of reaching Europe. And for those forunate enough to reach a place like Calais, France, only find that their problems aren't over. Lisa Bryant has the story.
Video

Video Westgate Siege Anniversary Brings Back Painful Memories

One year after it happened, the survivors of the terror attack on Nairobi's Westgate Shopping Mall still cannot shake the images of that tragic incident. For VOA, Mohammed Yusuf tells the story of victims still waiting for the answer to the question 'how could this happen?'
Video

Video Militant Assault in Syria Displaces Thousands of Kurds

A major assault by Islamic State militants on Kurds in Syria has sent a wave of new refugees to the Turkish border, where they were stopped by Turkish border security. Turkey is already hosting about 700,000 Syrian refugees who fled the civil war between the government and the opposition. But the government in Ankara has a history of strained relations with Turkey's Kurdish minority. Zlatica Hoke reports Turkey is asking for international help.
Video

Video Whaling Summit Votes to Uphold Ban on Japan Whale Hunt

The International Whaling Commission, meeting in Slovenia, has voted to uphold a court ruling banning Japan from hunting whales in the Antarctic Ocean. Conservationists hailed the ruling as a victory, but Tokyo says it will submit revised plans for a whale hunt in 2015. Henry Ridgwell reports from London.
Video

Video A Dinosaur Fit for Land and Water

Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Video

Video Iraqi Kurdistan Church Helps Christian Children Cope find shelter in churches in the Kurdish capital, Irbil

In the past six weeks, tens of thousands of Iraqi Christians have been forced to flee their homes by Islamic State militants and find shelter in churches in the Kurdish capital, Irbil. Despite U.S. airstrikes in the region, the prospect of people returning home is still very low and concerns are starting to grow over the impact this is having on the displaced youth. Sebastian Meyer reports from Irbil on how one church is coping.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid