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Posts tagged ‘European Central Bank’

Russia Rejects Cyprus Financial Rescue Bid as Deadline Looms.

Russia spurned Cyprus’s offers of assets for a bailout as the island nation’s lawmakers begin debate on legislation to avert a financial collapse.

“I think we aren’t able to get the support that we wanted to get,” Cypriot Finance Minister Michael Sarris said in an interview after checking out of the Lotte Hotel in Moscow. “But we must go back home because things are getting serious.”

Cypriot lawmakers begin debating legislation today to prevent a financial meltdown as the European Central Bank threatens to cut off a lifeline for the country’s banks in three days unless a bailout agreement with the European Union is reached. Russian companies and individuals may have about $31 billion of deposits in Cyprus, which in turn is the biggest source of foreign direct investment in Russia.

“The only thing that Cyprus could hope for is Gazprom buying some reserves from them,” Vladimir Kolychev, head of research at Societe Generale SA’s Rosbank unit in Moscow, said by phone. “It’s not clear what these gas reserves are worth, and apparently Gazprom wasn’t particularly interested.”

Russia has ended talks with Cyprus and will decide on participating in restructuring debt after the so-called troika overseeing euro-area bailouts makes its decision, Finance Minister Anton Siluanov told reporters today. The troika comprises officials from the European Commission, ECB and International Monetary Fund.

Door Open

“We didn’t close the door, didn’t say we won’t discuss anything,” Prime Minister Dmitry Medvedev said today at a briefing in the Russian capital with Jose Barroso, head of the European Commission. While “we are prepared to discuss various options for supporting” Cyprus, Russia’s possible assistance is contingent on a consensus over a rescue plan between the nation and the EU, he said.

A solution to the crisis “can be found” and it must be acceptable to all members of the currency union, Barroso said. “I believe there is no time to lose,” he said.

Sarris met with First Deputy Minister Igor Shuvalov and Siluanov on March 20, asking Russia to restructure a 2.5 billion-euro ($3.2 billion) loan that was granted in December 2011 by extending its duration beyond 2016 and lowering the rate. The Mediterranean island nation is seeking to overcome a deadlock after lawmakers rejected an unprecedented 5.8 billion- euro levy on bank deposits that the Eurogroup proposed.

‘Not Ready’

“I think the loan will be extended and the conditions adjusted,” Sarris said. “But the rest of the support, we are not ready to have concluded anything.”

A new loan to Cyprus wasn’t considered because it would have exceeded a European debt limit, Siluanov said. Cyprus had asked Russia for about 5 billion euros, three Russian government officials said yesterday, asking not to be identified because the talks were private.

The euro-area nation sought to attract Russian capital into a proposed investment fund that would include gas, banking and other assets, intended to help raise the 5.8 billion euros needed to trigger emergency loans, Siluanov said. “Investors didn’t show interest,” he said.

OAO Rosneft and OAO Gazprom, Russia’s state-run oil and gas producers, received an offer only to participate in tenders for Cypriot offshore assets and weren’t interested, a Russian government official said today. State-run OAO Sberbank and VTB Group, Russia’s two largest lenders, said they didn’t plan to buy assets in Cyprus.

Cypriot Commitment

Sarris said March 20 that talks would last “as long as it takes,” while his hotel room had been booked until March 25, according to hotel reception.

The euro appreciated 0.2 percent to $1.2929 at 1:52 p.m. in Moscow. Russia’s Micex Index declined 0.8 percent to 1,448.11, while the ruble was little changed at 34.9767 against the central bank’s target dollar-euro currency basket.

Russian companies and individuals have $31 billion of deposits in Cyprus, according to Moody’s Investors Service. Including loans to companies registered in Cyprus, Russia’s

© Copyright 2013 Bloomberg News. All rights reserved.

Cyprus on Verge of Financial Collapse.

The European Union gave Cyprus till Monday to raise the billions of euros it needs to secure an international bailout or face a collapse of its financial system that could push it out of the euro currency zone.

In a sign it was at least preparing for the worst, the Cypriot government sought powers on Thursday to impose capital controls to stem a flood of funds leaving the island if there is no deal before banks reopen following this week’s shutdown.

Parliament will reconvene later on Friday to debate a raft of government crisis measures after lawmakers adjourned a late-Thursday sitting saying they needed more time for consultation.

Even those measures looked likely to fall short of a promised “Plan B” to raise the 5.8 billion euros demanded by the EU in return for a 10 billion euro lifeline from the EU and IMF.

The European Central Bank said it would cut off liquidity to Cypriot banks without a deal, and a senior EU official told Reuters the bloc was ready to see the island banished from the euro to contain damage to the wider European economy.

Angry Cypriot lawmakers on Tuesday threw out a tax on deposits, calling the EU-backed proposal “bank robbery.”

After more talks on Thursday, the currency union’s finance ministers urged Cyprus to table a new proposal.

Trying to placate its lenders, the government proposed to parliament a “solidarity fund” that would bundle state assets, including future gas revenues, as the basis for an emergency bond issue, likened by JP Morgan to “a national fire sale.”

It also sought the power to impose capital controls on banks, a type of measure unseen since before the country joined the single currency bloc five years ago.

The European Central Bank, which has kept Cyprus’s banks operating with a liquidity lifeline, said the government had until Monday to get a deal in place, or funds would be cut off.

“Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks,” the ECB said.

In Brussels, a senior European Union official told Reuters that an ECB withdrawal would mean Cyprus’s biggest banks being wound up, wiping out the large deposits it has sought to protect, and probably forcing the country to abandon the euro.

“If the financial sector collapses, then they simply have to face a very significant devaluation, and faced with that situation, they would have no other way but to start having their own currency,” the EU official said.

Cypriot banks, crippled by their exposure to Greece, the center of the euro zone debt crisis, have been closed all week and are not due to reopen until Tuesday.

Long lines formed on Thursday at ATMs still dispensing cash, and there were angry scenes outside parliament where several hundred protesters, many of them bank employees, rallied after rumours the second-largest lender, Cyprus Popular Bank , was to be wound up.

Chanting “Hands off the bank,” several demonstrators fought with riot police.

“We have children studying abroad, and next month we need to send them money,” protester Stalou Christodoulido said through tears. “We’ll lose what money we had and saved for so many years if the bank goes down.”

The central bank said it was readying measures to keep Popular Bank afloat. Some banking officials said it could be split between good and bad assets.

Under the levy rejected by parliament, EU lenders, notably Germany, had wanted uninsured bank depositors to bear some of the cost of recapitalising the banks, but Cyprus feared for its future reputation as an offshore banking haven and planned to spread the burden also to small savers whose deposits under 100,000 were covered by state insurance. Lawmakers threw it out.

In Moscow since Tuesday, Cypriot Finance Minister Michael Sarris said he was discussing possible Russian investments in banks and energy resources, as well as an extension of an existing 2.5-billion-euro Russian loan.

He said Cyprus had no plans to borrow more money from Russia and add to its debt mountain. The Russian Finance Ministry had said on Monday that Nicosia sought an extra 5-billion-euro loan.

The chairman of the euro group of finance ministers, Dutchman Joreon Dijsselbloem, told the European Parliament in Brussels that Moscow informed the EU it had no intention of ploughing more money into Cyprus.

Senior euro zone officials acknowledged in a confidential conference call on Wednesday that they were “in a mess” and discussed imposing capital controls to insulate the currency area from a possible collapse of the small Cypriot economy.

Cyprus itself refused to take part in the call, minutes of which were seen by Reuters. Several participants described its absence as troubling and reflecting the wider confusion surrounding the island’s predicament.

© 2013 Thomson/Reuters. All rights reserved.

Cyprus Bank Limits Cash Withdrawals Amid Crisis.

  • Cyprus Bank Limits Cash Withdrawals Amid CrisisView PhotoCyprus Bank Limits Cash Withdrawals Amid Crisis

Cyprus’ second largest bank has stopped customers withdrawing more than 260 euros (£221) a day from cash machines, as MPs try to reach a deal to save the country’s economy.

The announcement came as the central bank said it had proposed a restructuring of the heavily indebted banking sector, including measures to prevent the Popular Bank, or Laika, going bankrupt.

“This consolidation process will prevent the risk of bank failures and protect in their entirety all insured deposits up to the amount of 100,000 euros ($129,000),” central bank governor Panicos Demetriades said.

“It also creates conditions for the recovery of the banking system and guarantees jobs.”

Earlier, as long queues formed as cash machines at Popular Bank branches across the island, the central bank was forced to deny rumours it was to be closed down.

Banks in Cyprus closed their doors last Friday and will remain shut until next Tuesday amid fears that the country’s financial crisis could prompt a run on the banks.

However, many customers have begun to fear that the troubled Popular Bank will never re-open.

“I’ve been to five ATMs, looking for the one with the smallest queue. The others had really long queues, at least 40 or 50 people,” Peter Larkin, a Nicosia resident waiting in line with his five-year-old daughter, said.

“There’s a lot of rumours that Laiki is going to go bankrupt and that (their ATMs) will stop giving out money.”

The Popular Bank said it was the high demand for cash that had forced them to reduce the amount customers could take out from 700 euros.

The bank’s employees staged an angry protest outside parliament amid the uncertainty, at one point breaking through a police cordon around the building.

Sky’s Ashish Joshi, reporting from outside parliament, said: “They are afraid about losing their jobs.

“The word has got out that the banks might be sacrificed in some shape or form for Cyprus to come up with its obligation.”

The island’s banking sector could face collapse if a new bailout bill is not agreed, following parliament’s rejection of a one containing a levy on all bank accounts in the country.

Parliament was due to vote on Thursday evening on a ‘Plan B’ to raise the 5.8bn euros (£4.9bn) Cyprus needs to contribute if it is to get the 10bn euros (£8.5bn) from eurozone partners and the IMF.

Earlier, party leaders agreed to set up an “Investment Solidarity Fund” to gather contributions from ordinary Cypriots, businessmen and foreign investors in a an attempt to raise the cash.

The country’s largest bank, the Bank of Cyprus, has appealed for MPs to pass a bailout deal.

“The Cyprus economy is on the brink and in a fragile state. The next move may prove its salvation or destruction,” the bank said in a statement.

The European Central Bank (ECB) has said it will only guarantee assistance until Monday night without a new aid programme being in place.

:: Greek Cypriot-born entrepreneur Theo Paphitis will be among the guests on Jeff Randall Live, at 7pm on Sky News.


Sky NewsSky News

EU reaches deal on bank supervisor: minister.




Irish Finance Minister Michael Noonan said Tuesday the European Parliament has approved setting up a single eurozone bank supervisor which supporters say will help stop troubled banks forcing their governments to seek bailouts.

Noonan, currently the chair of EU finance ministers, said a provisional deal had been reached with the parliament on the setting up of the Single Supervisory Mechanism (SSM).

Backed by EU countries last year, the SSM is a key element in efforts to stabilise the EU’s banking system by preventing banks from becoming so over-extended that their governments risk bankruptcy themselves in the effort to save the lenders from collapse.

“The creation of this supervisor is a major step towards banking union, restoring confidence in the European banking system and building stability across Europe,” said Noonan.

It is “the core element of banking union and a vital step in breaking the vicious link between the banks” and member state governments, he added.

Some details about the SSM, which will come under the European Central Bank, remained to be worked out before final approval, however.

Noonan said the agreement notably foresaw a greater role for the European Parliament in top appointments to the supervisory board.

The agreement came hours before the Cyprus parliament was set to vote on the controversial terms of a bailout package that would see it become the fourth eurozone nation to be rescued.

Cypriot banks, which took a huge hit in the EU-imposed Greek debt writedown, could be forced to impose a levy on all but relatively small savings accounts held on the island to unlock a 10-billion-euro ($13 billion) rescue package.

Parliament head Martin Schulz played down the significance of the deal on the bank supervisor however, saying that “the deeply distressing problems faced by Cyprus show how insufficient this step is in itself.”



Cyprus outcry at EU bailout terms sparks rethink.

Cyprus baulked again on Monday at putting an EU bailout to a vote in parliament as the crippling terms sparked a public outcry and mounting talk of a rethink by eurozone creditors, even as the uncertainty forced a prolonged closure of the island’s banks.

A Central Bank official confirmed that all bank branches on the island will remain closed until at least Thursday while politicians review with lenders an unprecedented demand for every account holder on the island to pay a tax of at least 6.75 percent on their balances as part of the rescue package.

Banks were closed anyway Monday for a scheduled public holiday but the uncertainty over the fate of the latest eurozone rescue package sparked jitters on world markets and fury from another key Cyprus creditor, Russia.

A final decision has to be taken on the details of the levy on balances before bank branches can reopen, or else there will be a run on accounts as depositors scramble to protect their money.

Eurozone finance ministers, who along with the International Monetary Fund demanded the deeply unpopular levy in marathon negotiations that climaxed early on Saturday, were set for new talks by videoconference later on Monday to review the deal, an EU official said.

“We really want to reduce the impact” on smaller savers but the “idea is still to achieve the same objective, (of raising) 5.8 billion euros,” the official said.

Eurozone leaders rejected a Cypriot request for 17 billion euros in rescue financing, insisting such a large debt would be unsustainable for the Mediterranean holiday island of less than one million people.

They offered just 10 billion euros, insisting the balance be made up from within the island, principally through the levy on bank deposits.

Hundreds of protesters gathered outside the parliament building in Nicosia, even though Monday was a public holiday, to register their anger at the unprecedented tax, not asked of other eurozone countries that have sought rescue.

“Wake up, they are sucking our blood,” demonstrators called to their fellow Cypriots.

As they delayed the emergency debate, Finance Minister Michalis Sarris and Central Bank governor Panicos Demetriades told MPs they were seeking a fresh formula that would protect people with small deposits in the island’s banks.

They said they were seeking to exempt those with balances of less than 100,000 euros ($129,000), who under the current plan would have to pay a 6.75 percent levy.

Parliament speaker Yiannakis Omirou said: “There are changes to the proposed government bill to be put forward, so we need more time in parliament and the finance committee to study these new proposals.”

EU officials confirmed that discussions were under way to amend the bailout package.

“If Cyprus’s president wants to change something regarding the levy on bank deposits, that’s in his hands,” European Central Bank board member Joerg Asmussen said. “He must just make sure that the financing is intact.”

Moscow, which has an outstanding 2.5 billion euro loan to Cyprus and billions more in deposits in the island’s banks, reacted angrily to the EU levy.

Estimates vary but the Moody’s rating firm estimates that Russian companies and banks keep up to $31 billion in Cyprus, which accounts for between a third and half of all Cypriot deposits.

“We should say this directly: this simply looks like the confiscation of other people’s money,” Russian news agencies quoted Prime Minister Dmitry Medvedev as saying.

The Cypriot finance minister is to visit Moscow on Wednesday and the government remains hopeful of Russian help.

The uncertainty over the EU bailout terms dealt a serious blow to global confidence by stoking fears that other eurozone countries in difficulty might be called on to take the same course of action.

Europe’s main stock markets lost ground and the euro fell under $1.30. Asian equities also fell heavily as did the price of oil.

“If European policymakers were looking for a way to undermine the public trust that underpins the foundation of any banking system, they could not have done a better job,” said CMC Markets analyst Michael Hewson.

In an address to the shell-shocked nation on Sunday night, President Nicos Anastasiades said he had chosen “the least painful option” and that rejecting the EU demands would have seen Cyprus exit the eurozone and face bankruptcy.

Terming it the worst crisis to hit Cyprus since the 1974 Turkish invasion, he gave an assurance that those taking a hit now would be compensated when huge gas offshore gas deposits are eventually exploited, in about 2018.

After a rush to ATM (Taiwan OTC: 3423.TWO – news) machines by worried account holders over the weekend, the Association of Cyprus Banks urged customers “to remain calm and to avoid panic.”


AFPBy Charlie Charalambous | AFP

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