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

Multimedia Baltimore 'Victory Rally' Follows Charges in Detainee Death

Saturday's rally is largest organized gathering since state's attonrey filed felony charges in police-custody death of Freddie Gray More

UN Denies Child Sex Abuse Cover Up in CAR

UNHCR says senior official suspected of leaking report suspended for breaching rules More

Nepal Officials Slammed Over Aid Response

VOA News has compiled from various organizations complaints from across Nepal of bottlenecks at customs, repeated harassing inspections of aid convoys and seizure of goods More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
From Aleppo To Berlin: Band of Brothers Escapes Civil Wari
X
Henry Ridgwell
May 03, 2015 1:12 AM
Hundreds of thousands of Syrians have fled the civil war in their country and journeyed to Europe by boat across the Mediterranean. It is a terrifying ordeal with dangers at every turn. A group of Syrian brothers and their friends describe their ordeal as they try to reach Germany. VOA's Henry Ridgwell reports. ...
Video

Video From Aleppo To Berlin: Band of Brothers Escapes Civil War

Hundreds of thousands of Syrians have fled the civil war in their country and journeyed to Europe by boat across the Mediterranean. It is a terrifying ordeal with dangers at every turn. A group of Syrian brothers and their friends describe their ordeal as they try to reach Germany. VOA's Henry Ridgwell reports. ...
Video

Video Rural Nepal Suffers Brunt of Quake’s Devastation

Nepal is still coming to grips with the full extent of the devastation and misery caused by last Saturday’s magnitude 7.8 earthquake. Some of the hardest-hit communities have been cut off by landslides making it difficult to assess the precise toll. A VOA News crew has been among the first to reach a few of the smaller, remote communities. Correspondent Steve Herman reports from the Sindhupolchak district, east of Kathmandu, which suffered greatly in Nepal’s worst quake in more than 80 years.
Video

Video Black Families Use Baltimore Case to Revisit 'Police Talk'

Following Freddie Gray’s death in police custody this month, VOA interviewed black families throughout the eastern U.S. city of Baltimore about how they discuss the case. Over and over, parents pointed to a crucial talk they say every black mother or father has with their children. Victoria Macchi has more on how this conversation is passed down through generations.
Video

Video Middle East Atheist Channel Defies Taboo

In Egypt, a deeply religious country in a deeply religious region, atheism is not only taboo, it is dangerous. It is sometimes even criminal to publicly declare nonbelief. Despite the danger, one group of activists is pushing back with a new online channel that defends the right not to believe. VOA’s Heather Murdock reports.
Video

Video Nepal Quake Survivors Tell Their Stories

Against all hope, rescuers have found a few more survivors of the devastating earthquake that hit Nepal last Saturday. Mountain climbers and hikers trapped in remote places also have been airlifted to safety, and aid is finally reaching people in the areas closest to the quake's epicenter. Survivors and rescuers are now recounting their experience. Zlatica Hoke has this story.
Video

Video Lessons for Germany, Europe Remain on Anniversary of WWII's End

The 70th anniversary of the end of World War II will be marked May 8-9 in all European countries except Germany, which lost the war. How is the war viewed there, and what impact is it still having? From Berlin, VOA’s Al Pessin reports.
Video

Video 'Woman in Gold' Uses Artwork as Symbol of Cultural Identity

Simon Curtis’ legal drama, "Woman in Gold," is based on the true story of an American Jewish refugee from Austria who fights to reclaim a famous Gustav Klimt painting stolen from her family by the Nazis during World War II. It's a haunting film that speaks to the hearts of millions who have sought to reclaim their past, stripped from them 70 years ago. VOA's Penelope Poulou reports.
Video

Video Nepal Town Destroyed By Quake Counts Itself Lucky

Foreign search teams on Wednesday began reaching some of the communities outside Kathmandu that suffered worse damage than Nepal’s capital from last Saturday’s massive earthquake. VOA Correspondent Steve Herman is in Sankhu - a town of about 10,000 people - where there is relief the death toll is not higher despite widespread destruction.
Video

Video First Surgical Glue Approved for Use Inside Body

While medical adhesives are becoming more common, none had been approved for use inside the body until now. Earlier this year, the first ever biodegradable surgical glue won that approval from the U.S. Food and Drug Administration. VOA’s Rosanne Skirble reports on the innovation and its journey from academia to market.
Video

Video Somali Hotel Chain Owner Strives to Make a Difference

Many in the Somali diaspora are returning home to make a new life despite the continuing risks. Since 2011 when a military campaign against Al-Shabab militants began making progress, members of the diaspora community have come back to open hospitals, schools, hotels, restaurants and other businesses. Abdulaziz Billow in Mogadishu profiles the owner of a chain of hotels and restaurants who is helping to bring change to the once-deadly Somali capital.
Video

Video Study: One in Six Species Threatened with Extinction

Climate change is transforming the planet. Unless steps are taken to reduce global warming, scientists predict rising seas, stronger and more frequent storms, drought, fire and floods. As VOA’s Rosanne Skirble reports, a new study on species extinction underscores the need to take action to avoid the most catastrophic effects of rising temperatures.
Video

Video Taviani Brothers' 'Wondrous Boccaccio' Offers Tales of Love, Humor

The Italian duo of Paolo and Vittorio Taviani have been making movies for half a century: "The Night of the Shooting Stars," "Padre Padrone," "Good Morning, Babylon." Now in their 80s, the brothers have turned to one of the treasures of Italian culture for their latest film. VOA’s Carolyn Weaver reports.
Video

Video Child Migrants Cross Mediterranean Alone, Face Unknown Future

Among the thousands of migrants making the deadly journey by boat to Europe, there are unaccompanied girls and boys. Some have been sent by relatives to earn money; others are orphaned or fleeing war. From a shelter for young migrants in the Sicilian town of Caltagirone, VOA's Henry Ridgwell reports.
Video

Video Baltimore Riots Shed Light on City’s Troubled Past

National Guard troops took up positions Tuesday in Baltimore, Maryland, as authorities tried to restore order after rioting broke out a day earlier. It followed Monday's funeral of a 25-year-old black man who died while in police custody earlier this month. VOA's Chris Simkins reports.
Video

Video Challenges Await Aid Organizations on the Ground in Nepal

A major earthquake rocked Nepal on Saturday and killed thousands, injured thousands more and sent countless Nepalese outside to live in makeshift tent villages. The challenges to Nepal are enormous, with some reconstruction estimates at around $5 billion. Aid workers from around the world face challenges getting into Nepal, which likely makes for a difficult recovery. Arash Arabasadi has the story from Washington.

Poll: Baltimore Police Charged

Poll archive

VOA Blogs