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| What Will Happen in Cyprus? |
| (2013-04-02) |
| Last updated: 2013-04-03 13:55 EET |
The Bank of Cyprus on Monday suspended all its operations in Romania for a week, as it plans to sell its branch in Bucharest. This is but one of the many consequences of the measures Cyprus committed to taking in order to secure a vital loan from its international lenders in order to rescue its banking sector. The measures are deemed as unprecedented in the euro zone.
The largest Cypriot bank, the Bank of Cyprus has announced it will suspend all operations in Romania for a week, during which time clients will be able to use only the ATM system for their transactions. The measure follows a decision by the Cypriot Central Bank to work out a plan to sell its branch in Romania. In Bucharest, advisor to the National Bank Governor Adrian Vasilescu says this is the best-case scenario for the bank’s Romanian depositors, arguing the decision will have no impact on the activity of the Romanian banking sector.
Adrian Vasilescu: “This will have no impact, whether material or psychological, on the activity of the Romanian banking system. The decision was taken following tough negotiations. The Romanian Central Bank has been in permanent contact with the Cypriot Central Bank and the Bank of Cyprus with a view to taking the best-suited decision. A decision that wouldn’t have favoured Romania was to capitalize 40% of all bank deposits exceeding 100,000 euros. Instead, the Romanian Central Bank has negotiated a different option in order to protect its Romanian depositors”.
According to Adrian Vasilescu, after a Romanian bank has bought the Bank of Cyprus, the branch of the Cypriot Bank will be subject to the Romanian law and will enjoy the same status as any local bank. The sellout to a local bank of all branches of the Cypriot banks was what happened in Greece too, where Piraeus Bank became the most important bank after procuring all the local branches of the Bank of Cyprus, Laiki and Hellenic Bank. Cyprus narrowly managed to avoid defaulting on its payments by agreeing with its international lenders, the European Union, the European Central Bank and the IMF, to restructure two of its largest banks, the Bank of Cyprus and the Cyprus Popular Bank or Laiki Bank. The latter will be shut down, while its guaranteed assets are to be transferred to the Bank of Cyprus.
Following the series of measures, all Bank of Cyprus depositors are bound to lose around 40% of their deposits, which will be immediately converted into shares to support the recapitalization of the bank. Another 22.5% of deposits will be frozen in non-interest bearing accounts pending the finalization of the restructuring process, a project that is estimated to last a few months. Those funds may be accessed if need be and in turn be converted into shares. Official data indicate that there are some 19,000 depositors, whose combined deposits stand at around 8 billion euros.
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2025-04-03
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