Eurozone has found a way out for Cyprus
The economic situation in Cyprus improved after the Eurogroup decided to provide Nicosia with financial assistance in the amount of ten billion euros. According to experts, the acute phase of the crisis in Cyprus has already been overcome.
As a result of lengthy negotiations, it was decided that deposits of more than 100 thousand euros covered by insurance in the EU will be fully retained, and for large – above 100 thousand euros – the tax will be 40%. Cyprus President Nikos Anastasiadis noted that he was satisfied with the agreement.
Now the Cypriot authorities are trying by all means to prevent the outflow of funds of investors. They will be allowed to withdraw no more than 300 euros per day to prevent the outflow of liquidity. At the same time, a number of prohibitive measures are being introduced, including the abolition of cashing checks and restrictions on the export of currency outside the country.
Citizens of Cyprus will also temporarily be unable to take out more than 1000 euros when traveling abroad. Customs officers will conduct checks at border crossings.
Money transfers abroad are also prohibited, and no more than 5 thousand euros per month can be withdrawn from credit and debit cards when traveling to other countries, the BBC reports.
“The most important thing is the fate of the two largest banks of the Bank of Cyprus and Laiki. The first will be restructured, according to which about 30% of deposits of more than 100 thousand euros will be written off, the second will be completely liquidated after the non-trash assets are transferred to the Bank of Cyprus. “This credit institution will remain the largest bank, but not the only one. Banks in the country should open after the holidays,” said Alpari senior analyst Daria Zhelannova.
“By and large, we managed to overcome the acute phase of the financial crisis in Cyprus. Nevertheless, the so-called“ Plan B ”still leaves a number of questions, first of all, what will be the numbers of losses of Russian business from the Cyprus crisis,” the expert noted.
The Bank of Cyprus will be one of the main recipients of the allocated funds, which are likely to go towards the reorganization of “bad” assets, including those that are merged, UFS IC analyst Ilya Balakirev points out.
“So far the situation is developing in such a way that one cannot expect an actual default of the Bank of Cyprus. It is” too big to fail “- its default will mean the collapse of the entire banking system of the country. After merging with Laiki, it will become even greater,” said the analyst.
“The support of the European Union and the Central Bank of Cyprus in this situation will help to survive, but you can go beyond the framework of survival only if you have a clear strategy for growth and development. If suddenly they succeed, like some American banks, get a generous financial boost and even compensation for losses, then this can become a springboard for building a model of sustainability and even growth, “says Konstantin Tyutyunov, head of the Production, Quality and Innovation department of the Russian School of Management.
Shares of the Bank of Cyprus, which will be issued to depositors who have lost interest on deposits in the amount of more than 100,000 euros, are unlikely to help compensate for the losses, – said Ilya Balakirev: “The decision is interesting for the Bank of Cyprus itself – it actually allows you to transfer part of the deposits that the bank all equally, it willn’t be able to give – directly to capital, which you don’t need to give at all. As a result, formally, the bank’s balance can significantly improve as a result of such an operation, and in part this can stop the flight of depositors. ”
As for the Bank of Cyprus subsidiary in Russia, Uniastrum Bank, this asset is unlikely to suffer, experts say. Uniastrum is a fairly independent bank, – Ivan Kibardin, Chief Specialist of the Intercommerts Bank Securities Division, and Andrei Vernikov, Deputy Director General of Zerich Capital Management, agree.
“Uniastrum is, in general, an independent financial unit, and it’s not developing quite badly. If a“ competent ”decision on restructuring is made, then Uniastrum should not suffer at all, as its clients as well. Assessing the whole situation as a whole, I would say that the “daughter” is in a good position, adds Ivan Kibardin.