Cypriot Finance Minister Michael Sarris said Russia’s ties to Cyprus will continue even though it has been “disappointed” by an financial-industry overhaul that will lead to losses for Russian investors.
“The relationship is not over,” Sarris told reporters early today in Brussels after European authorities announced plans to impose losses on depositors in a bank restructuring as a condition of providing 10 billion euros ($13 billion) in aid. Russian companies and individuals have an estimated $31 billion in Cyprus, according to Moody’s Investors Service.
Sarris said he drew a mixed reaction on his trip to Russia last week, where he met with Finance Minister Anton Siluanov and First Deputy Prime Minister Igor Shuvalov after an initial rescue package fell apart. Some of the Russians he met with expressed disappointment while others said, “we can deal with you through good times and we’re going to stay with you through bad times,” Sarris said, without providing details.
Cyprus avoided a default and unprecedented exit from the euro currency by bowing to demands to shrink its banking system in exchange for the bailout. President Nicos Anastasiades agreed to shut Cyprus Popular Bank Pcl, the country’s second-largest bank, and restructure the larger Bank of Cyprus Plc, as demanded by a German-led bloc of creditor nations. Sarris served as chairman as Cyprus Popular last year.
Banks in Cyprus, which have been shut for the past week, will remain closed until further notice, and Sarris said he did not know yet how and when banking operations would resume. Lawmakers in Cyprus voted last week to impose capital controls to prevent a run on deposits when they reopen.
European Central Bank President Mario Draghi provided assurances that Bank of Cyprus and other Cypriot banks will retain access to emergency funding, Sarris said. Ongoing Emergency Liquidity Assistance, or ELA, is “a key element” of protecting the financial sector, he said.
Sarris said Cyprus planned to compensate welfare funds at Cyprus Popular by providing them with shares. As part of the rescue package, Cyprus Popular will be shut down and its unsecured creditors are expected to be nearly wiped out.
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